EU Inflation to Dictate Today's Mood
31 August 2022
Investors remain anxious, and volatility continues to be elevated as market players assess the incoming ECB and Fed meetings. Both central banks are expected to deliver a 75 bps rate hike.
For the second day, the EUR/USD pair has managed to close modestly above parity (1.000) as the likelihood of a 75 basis point rate hike in September increased. A number of European Central Bank officials are arguing for accelerating monetary policy tightening to control inflation.
Moreover, per early projections, the German CPI increased by 7.9% yearly in August, and the EU will announce inflation data later today. Inflation is projected to climb further to 9% year-on-year, while the monthly gauge is seen jumping from 0.1% to 1.1%.
According to Estonian policymaker Madis Muller, the European Central Bank should consider a 75-basis-point interest rate increase at the September policy meeting.
Chinese economy in problems
In other news, August saw a second consecutive month of decline in Chinese industrial activity as COVID-19 lockdowns, and a growing power shortage continued to drag on the economy.
In August, the official manufacturing purchasing managers' index was at 49.4. Even though it was below 50, which signals sector contraction, it was still better than July's 49.0 and the predicted 49.2, indicating a little improvement in circumstances from the previous month.
Oil has had an exciting week so far, rising sharply Monday, only to drop even more Tuesday amid news that Iran and the United States have achieved an agreement to resurrect the nuclear agreement, which might lawfully allow the Islamic Republic to resume oil exports. As a result, the WTI benchmark plunged 5% and dropped below the 200-day moving average again.
"Iran and the US have reached an agreement (on the revival of JCPOA), and it will be announced in the next two or three weeks," a former IAEA official told Iran International, according to a news alert monitored by Investing.com.