All 70 economists polled anticipate that the ECB is to hold the deposit rate unchanged at 4.00% until year-end. Meanwhile, 41 of 70 economists (~59%) see the ECB waiting until at least Q3 next year i.e. July at the earliest before taking the step to cut rates. Here are some of the comments from the poll:

„It will probably be some time before the ECB will describe it as such, but 4.00% is likely t o be the terminal rate, in our view. Lagarde apparently did not want to say rates have peaked… However, the hurdle to a further hike does feel relatively high.“ – Deutsche Bank

„Another rate hike is not our base case, but there is a fair risk a hike could materialise if wage growth and inflation remain strong through December.“ – Rabobank

In terms of the balance of risks for rate cuts, 23 of 38 economists replying to the question say that the risk is that it might be earlier than they forecasted.

This article was written by Justin Low at www.forexlive.com.

With
the global economy weakening, you may wonder what will impact capital markets
in the second half of 2023. Will the U.S. Federal Reserve stop raising rates?
What factors will influence dollar and gold prices? What will be the key themes
of the year ahead? Several vital stories in the remainder of 2023 are worth
considering when investing in global markets.

Fed is expected to slow or pause rate
hikes in the remaining 2023

The
Fed has raised interest rates eleven times since March 2022 to control runaway
inflation, raising its key lending rate in July to the highest level in 22
years. This caused a decline in the U.S. stock market, a rise in Treasury
yields, a banking crisis, and a strengthening of the U.S. dollar.

In
the first half of September, U.S. Federal Reserve officials said the U.S.
central bank can afford to sit tight for now but do not rule out the
possibility of another rate hike to fight inflation. According to the CME FedWatch Tool, the probability of a pause at the upcoming FOMC
meetings is high, with a 93% probability of holding at the end of the September
2023 meeting and a 58% probability of pause at the end of the December 2023
FOMC meeting.

Investors
should keep in mind that business cycles usually outpace economic cycles.
Therefore, if a pause is announced at the September FOMC meeting on 19 – 20
September, the U.S. dollar will likely weaken, and stock market prices will
rise.

Early onset of U.S. presidential
election mania

The
next 60th presidential election is scheduled for 5 November 2024. On 15
November 2022, Donald Trump announced the launch of his campaign. On 25 April
2023, incumbent U.S. President Joe Biden announced his candidacy.

Suppose
we superficially characterise the two sides of the upcoming election. In that
case, it comes out that Donald Trump and the Republicans are committed to
traditional values, including being in favour of lowering the tax burden and
doing away with non-performing subsidies. At the same time, Joe Biden and the
Democrats welcome immigration, equality, and increasing the tax burden on the
rich.

Both
candidates have already launched their campaigns, meaning the number of
political commentaries will increase even before the primary elections in early
2024. In the current situation, the Republicans‘ preponderance of votes is
perceived as a positive signal for the markets—stock market growth. At the same
time, the preponderance of votes favouring the Democrats is perceived as a
negative signal—strengthening of the U.S. dollar. Investors should listen to
the early signs coming from the U.S. media regarding the presidential election
and adjust their investment strategy depending on the emerging early signals.

India’s wedding season could accelerate
the gold price

Seasonality
strongly influences gold performance throughout the year, particularly with
major consumers in India and China who use it for cultural and religious
purposes. The period from November to February is a particularly favourable
time for the precious metal, which falls in the middle of the wedding season in
India. More than half of all gold demand in India is for weddings, which
require a massive amount of jewellery, and gold is often seen as a sign of
wealth and status among Indians.

With
the U.S. Federal Reserve signalling a pause in key rate hikes, the effect of
the wedding season could be synergistic—rising demand for gold against a weak
dollar will boost gold prices from November 2023 onwards.

Conclusion

We
live in an unstable economic and political environment of challenge and
turmoil. However, amidst the challenges, there are opportunities for those
investors who keep their finger on the pulse of the action. From September 2023
onwards, there will be many opportunities, starting with the U.S. Federal
Reserve’s interest rate decision and the wedding season in India. If you want
to know more, read the rest of the article in part two.

About OctaFX

OctaFX is an international broker that has been providing
online trading services worldwide since 2011. It offers commission-free access
to financial markets and various services already utilised by clients from 180
countries with more than 42 million trading accounts. Free educational
webinars, articles, and analytical tools they provide help clients reach their
investment goals.

The
company is involved in a comprehensive network of charitable and humanitarian
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short-notice relief projects supporting local communities.

OctaFX
has also won more than 60 awards since its foundation, including the ‘Best
Online Broker Global 2022’ award from World Business Outlook and the ‘Best
Global Broker Asia 2022’ award from International Business Magazine.

This article was written by FL Contributors at www.forexlive.com.

• The central bank bonanza heats up this week
• It’s not just major central banks that will be in focus this week
• The bond market is in the spotlight
• ECB’s Kazimir says cannot rule out further rate hikes
• Goldman Sachs lowers BOE terminal rate forecast to 5.50%
• China says yuan will show ‚positive changes‘ against dollar after ‚bottoming out‘
• China central bank and forex regulator meets with foreign financial institutions
• SNB total sight deposits w.e. 15 September CHF 473.0 bn vs CHF 468.9 bn prior

Markets:

• USD little changed
• European equities lower; S&P 500 futures down 0.2%
• US 10-year yields up 1.6 bps to 4.338%
• Gold up 0.1% to $1,926.46
• WTI crude up 0.6% to $91.30
• Bitcoin up 2.9% to $27,194

It was a quiet session overall as markets look to get settled into the new week, playing a bit more of a waiting game ahead of key central bank policy decisions still to come.

There will also be a host of major economic data and all eyes will be on the economic calendar in the days ahead, leaving little to work with for now.

As such, major currencies are still caught in relatively narrow ranges with little incentive to really move. Dollar pairs are tightly bound so there isn’t much to really touch on in the FX space.

In other markets, oil continues its impressive form with WTI crude inching above $91 while bond yields are also holding up with 10-year Treasury yields right on the cusp of a breakout to its highest levels since 2007.

Equities on the other hand are stuttering now ahead of the US open, after a relatively calmer session in Europe. The UAW strike is still a factor for US stocks, so keep that in mind as we get into the thick of things to start the new week.

This article was written by Justin Low at www.forexlive.com.

After the relatively calmer mood throughout European morning trade, US futures are now starting to take a bit more of a hit on the day. S&P 500 futures are now down by 0.2% with Nasdaq futures down 0.3%. That is keeping a drag on the softer mood in European indices as well as we look towards the session ahead.

Just be wary that the UAW strikes are still an issue and that is one negative factor that is weighing on sentiment ahead of the return of Wall Street from the weekend later.

This article was written by Justin Low at www.forexlive.com.

The PBOC is out with some comments noting that China will improve its policies and create a more market-oriented and international-level business climate. I would look past the smoke and mirrors here as the meeting seems to involve the forex regulator for some reason. Also, there are plenty of things going on behind the scenes in China right now. Not least after this report from last week:

• PBOC calls on banks to hold off on immediate dollar purchases – report

This article was written by Justin Low at www.forexlive.com.

The latest results from Reuters‘ poll on economists on the SNB ahead of the policy meeting decision this week:

• 30 of 37 economists expect another 25 bps rate hike this week
• The majority then sees the SNB keeping rates unchanged at 2% until at least middle of next year

As the Fed and ECB also move to the sidelines, other major central banks will also feel compelled to do so amid a slowdown in global economic conditions. I think the SNB can manage that quite well as inflation pressures are not as high and stubborn compared to other countries. If anything, it will be more interesting to see how the BOE manages this particular tightrope in this week’s meeting communique.

This article was written by Justin Low at www.forexlive.com.

• Residual differences remain between central bank communications and market expectations
• Current build-up of leveraged shorts in Treasury futures is a vulnerability worth monitoring

These are already well in the consideration of market participants, without needing to be said really. It is all part of the bigger picture narrative as seen here.

This article was written by Justin Low at www.forexlive.com.

UPCOMING EVENTS:

• Monday: NZ
  Services PMI, US NAHB Housing Market Index.
• Tuesday: RBA
  Meeting Minutes, Canada CPI, US Building Permits and Housing Starts.
• Wednesday: PBoC
  LPR, UK CPI, BoC Summary of Deliberations, FOMC Policy Decision.
• Thursday: NZ
  GDP, SNB Policy Decision, BoE Policy Decision, US Jobless Claims.
• Friday: Japan
  CPI, BoJ Policy Decision, UK Retail Sales, Canada Retail Sales, Flash PMIs
  for AU, JP, UK, EZ, US.

Tuesday

The Canadian Headline CPI Y/Y is expected
to tick higher to 3.8% vs. 3.3% prior, while the M/M reading is seen at 0.2%
vs. 0.6% prior. The BoC continues to complain about the slow disinflation in
the underlying measures, which beat expectations in the previous
months although they were lower than the
prior readings. There’s currently no consensus for the core measures but higher
figures would put the central bank in a tough position given the recent rise in
wage
growth.

Wednesday

The UK Headline CPI Y/Y is expected to
increase to 7.1% vs. 6.8% prior, while the M/M reading is seen at 0.7% vs.
-0.4% prior. Such a big increase is due to higher energy prices with the
central banks more focused on the core measures at the moment. The UK Core CPI
Y/Y is expected at 6.8% vs. 6.9% prior, while the M/M figure is seen at an
uncomfortable 0.7% vs. 0.3% prior. This report is unlikely to change the
market’s pricing for this week’s BoE meeting where the central bank is expected
to hike by 25 bps, but it will influence the expectations for the next
meetings.

The Fed is expected to hold rates steady
at 5.25-5.50% but the market’s focus will be on the Summary of Economic
Projections (SEP) and the Dot Plot to see if the central bank still sees the
need for another rate hike or it has reached its terminal rate already. As a
reminder, in the June
Dot Plot the Fed increased its terminal rate
projections by 50 bps to 5.6% from the previous 5.1% in March. The market
currently sees a 50/50 chance for another rate hike at the November meeting
given the strength in the economic data recently with rate cuts being priced
for Q3 2024.

Thursday

The SNB is expected to hold rates steady
at 1.75% given the weak economic data and both the headline and core inflation
measures being in the SNB’s 0-2% target band.

The BoE is expected to hike by 25 bps
bringing the bank rate to 5.50% with Dhingra being the usual dissenter. Recent
communication seems to be leaning more towards keeping interest rates high long
enough to let the tightening in the pipeline to come through. Nonetheless, the
central bank should keep all the options on the table given its inflation and
wage growth rates.

The US Jobless Claims beat expectations
once again the last
week as the labour market continues to
soften although it remains fairly tight. This week the consensus sees Initial
Claims at 225K vs. 220K prior and Continuing Claims at 1695K vs. 1688K prior.

Friday

The BoJ is expected to keep everything
unchanged with rates at -0.10% and YCC to target 10yr JGBs at 0% with a soft
cap at -/+0.50% and a hard cap at 1.00%. The yield on the 10yr recently spiked
to 0.70% following BoJ
Governor Ueda comments about a “quiet exit”
from NIRP if the data supports such a move. The BoJ, of course, intervened by
buying unlimited amount of JGBs last week as they already repeated many times
that they will do so if the pace of the moves is too fast. Moreover, the wage
growth data continues to point to a slowdown, and this is something that the
BoJ watches very carefully.

The Flash PMIs are usually big market
movers as they are the most important leading indicators we have. The market
should focus on the Eurozone and the US PMIs, with the latter likely to have a
bigger impact on global markets depending on the outcome. The US Manufacturing
PMI is expected to match the prior reading at 47.9, while the Services PMI is
seen lower at 50.3 vs. 50.5 prior.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• General Motors says it expects to run out of parts at Kansas plant as soon as next week
• Broader US indices tumble and close lower on the week
• S&P and NASDAQ close lower on the week after sharp declines today
• WTI crude futures settle at $90.77. What are the technicals telling traders?
• The electric car race is shaping up to be one of the all-time economic battles
• Baker Hughes US oil rig count 515 vs 513 prior
• Challenger: US labor market is starting to cool and employer’s are hiring at a slower clip
• European equity close: UK stocks wrap up a stellar week with gains
• Following the Fed is a good clue on when to buy bonds
• RBC: Navigating the CHF landscape amid SNB’s upcoming neeting and USD/CHF dynamics
• US Sept prelim UMich consumer sentiment 67.7 vs 69.1 expected
• US stocks decline at the open as we head into a super-soft seasonal period
• US August industrial production +0.4% vs +0.1% expected
• US August import prices +0.5% vs +0.3% m/m expected
• US Empire Fed manufacturing index for September 1.90 versus -10.00 estimate
• Canada July manufacturing sales +1.6% vs +0.7% expected
• The AUD is the strongest and the JPY is the weakest as the NA session begins
• ForexLive European FX news wrap: Dollar mixed, yields hold higher still
• ECB’s Lagarde: We have not discussed rate cuts
• ECB’s Kazaks: Latest monetary policy move was not a ‚dovish hike‘
• ECB’s Lagarde: We will set rates at restrictive level for as long as needed

The EUR is ending the day as the strongest of the major currencies. The USD is also mostly higher with gains vs all the major currencies with the exception of the EUR. The JPY and the NZD were the weakest of the majors.

The gains in the EUR come a day after the ECB raised rates by 25 basis points (10th consecutive hike in rates). Next week, the Fed will meet on Wednesday. The expectations are for no change in policy.

The SNB and BOE on Thursday, will also meet with each expecting to raise rates by 25 basis points. The BOJ will meet on Friday. Traders will be eyeing to see if they are ready to tighten conditions.

It will be a big week for central banks next week.

Today’s move higher in the US dollar was helped by higher rates. Data in the US was mixed today with the:

• NY Fed Manufacturing stronger: The actual index is at 1.90, which is a significant improvement from the prior period’s -19.00, though it was expected to be -10.00.

• Import and Export Prices MM higher: The monthly import prices increased by 0.5%, surpassing the forecasted 0.3% and the previous month’s 0.4%. Export prices for the month rose by 1.3%, which is higher than the expected 0.4% and the previous 0.7%.

• Industrial Production MM stronger: Industrial production increased by 0.4% monthly, which is higher than the expected 0.1% and the prior 1.0%.

• Capacity Utilization SA stronger: The capacity utilization rate is 79.7%, slightly above the forecasted 79.3% and matching the prior period’s rate.

• U Mich Sentiment Prelim weaker: The preliminary sentiment index from the University of Michigan is 67.7, lower than the expected 69.1 and the prior 71.2.

• U Mich Conditions Prelim weaker: The conditions index stands at 69.8, compared to the expected 75.3 and the prior 77.4.

• U Mich Expectations Prelim modestly stronger: The expectations index is at 66.3, slightly above the forecasted 66.0 and below the prior 67.3.

• UMich 1Yr Inf Prelim lower: The 1-year inflation expectation came in at 3.1%, down from the prior 3.3%. while the 5 Yr inflation came in lower too at 2.7% vs 2.9% last month

In the US debt market, the weaker was ignored with yields moving higher across the yield curve:

• 2 year 5.0347%, up 2.1 basis points
• 5 year 4.4615%, up 4.3 basis points
• 10 year 4.334%, up 4.4 basis points
• 30 year 4.419%, up 3.4 basis points

For the trading week, yields were also higher, helping to push the DXY index higher on the week (although it was mixed vs the major currencies),

• 2 year rose 4.2 basis points
• 5 year rose 5.8 basis points
• 10 year rose 6.8 basis points and closed at the highest level since November 2007
• 30 year up 8.4 basis points and closed at the highest since April 2011.

In the forex this week, the DXY is closing the week at 105.33, up by a modest 0.26%. Nevertheless, the rise took the price to the highest level since the November 21, 2022 trading week.

Looking at the major currency pairs, the currencies were mixed. The USD was higher vs the:

• EUR, +0.36%
• GBP, +0.66%
• JPY, +0.036%
• CHF, +0.53%

The greenback lost ground this week vs the commodity currencies with declines vs the:

• CAD, down -0.86%
• AUD, down -0.83%
• NZD, down -0.23%

US stocks closes sharply lower with the broader indices leading the way. The Nasdaq was the weakest with a decline of 1.56%, while the S&P fell -1.22%. The Dow industrial average fared relatively better with a decline of -0.83% but only 3 of the 30 Dow stocks advanced.

For the trading week, the declines today, shifted the fortunes of the Nasdaq and the S&P into the red. The Nasdaq fell -0.39% while the S&P fell -0.16%. The Dow eked out a small 0.12% gain on the week.

European indices closed the day and week higher:

• German Dax rose 0.56% today and 0.97% for the week
• France’s Cac rose 0.96% today and 1.91% for the week
• UK’s FTSE 100 rose 0.50% and surged 3.12% this week
• Spain’s Ibex rose 0.01% today and rose 1.98% this week.

IN other markets:

• Crude oil did turn into negative territory intraday but is trading up $0.61 or 0.68% at $90.77. For the week, crude oil closed higher for the 3rd consecutive week adding 3.73% today
• Gold moved higher by $13.93 today and was up 0.29% on the week
• Silver rose 1.8% today and rose 0.50% on the week.

IN the digital currency Bitcoin, the price is trading at $26482 currently after trading quietly between $26228 to $26683.

Hoping you all have a good weekend. Thank you for your support. Next week will be dominated by the Fed, BOE SNB and Bank of Japan from Wednesday to Friday.

This article was written by Greg Michalowski at www.forexlive.com.

The ship shortage from Covid, led to a shortage of autos for a few years and also to higher prices for used and new cars. The auto strike now threatened supply once again if it continues. Also of concern is that prices which are already up sharply, will continue the upward trajectory leading to higher inflation down the road.

The Federal Reserve will announce her interest rate decision on Wednesday at 2 PM ET. CPI inflation year on year rose to 3.7% from 3.2%, and sits well above the 2% target. The month-to-month increased by 0.6%.

This article was written by Greg Michalowski at www.forexlive.com.