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Oil and rates surging ahead of US CPI today
Confirmed
In Short: Oil prices surged to USD 108 per barrel, while global interest rates are seeing renewed upward pressure due to inflation concerns, according to reports from Action Forex and FXStreet.
The European Central Bank (ECB) raised its policy rates by 25 basis points, bringing the deposit rate to 2.5%, aligning with market expectations but still surprising some analysts.
The US Producer Price Index (PPI) report was mixed ahead of the Federal Open Market Committee (FOMC) meeting next week, indicating a complex inflation landscape.
The ECB's communication at the meeting, including new projections, was described as very hawkish, leading to expectations of further rate hikes in October and December, potentially bringing the deposit rate to 3.00%.
Markets are now pricing in a longer hiking cycle, with up to 3-4 more rate hikes expected over the coming year, driven by energy price concerns and inflationary pressures.
What's confirmed
- This is adding renewed inflation pressure and feeding through into global rates markets.
- In the euro area, the ECB hiked policy rates by 25bp, bringing the deposit rate to 2.5%, in line with consensus and market pricing.
- In the US, the PPI report was mixed ahead of next week’s FOMC meeting.
What's still developing
- In commodities, brent jumped to USD 108/bbl last night and held that level overnight.
- The ECB revealed a firm focus on energy prices in its reaction function, so we now expect the ECB to hike in both October and December, bringing the deposit rate to 3.00%.
- Read more in ECB Review - A "no-brainer" hike and more to follow, 10 September.
- One step ahead, HUAWEI has already revealed its latest foldable: the second generation of its triple-folding phones.
- Both the inner and outer displays use LTPO technology, allowing variable refresh rates between 1 and 120Hz.
- Polymarket still shows President Lula's chances of winning as some 7% ahead of Bolsonaro, but the gap is closing fast.