The US, Japan and the UK may have kept interest rates on hold last week, but with the Federal Reserve indicating that rates will stay higher for longer, there is turmoil in the equity markets. The NASDAQ 100 fell 500 points last week, and with weakness continuing into this morning's trading session, the volatility looks like it will continue throughout the week.
US durable goods orders (15:30 Wednesday) is the first meaningful economic release of the week. After a terrible -5.2% in July, analysts are expecting a modest decline of -0.4% for August. The final reading of US Q2 GDP is expected to show an increase to 2.2% when it is released on Thursday (15:30), as the US economy continues to tick over at a steady rate. This could give the US dollar a further boost.
Friday brings two key inflation readings. Firstly, from the Euro Area (12:00) where the ECB will be hoping the analysts have got it right with their predictions of a further drop to 4.5%. At 15:30, the Core PCE Price Index (which is the Federal Reserve's preferred measure of inflation) is released. A 0.2% increase is expected for August, but anything above this could ramp up the rhetoric about more Fed hikes in the coming months and further appreciation of the US dollar.
The oil markets continue to provide a fascinating mix of politics and market forces. Russia and Saudi continue with their supply restrictions whilst the biggest buyer, China, struggles with a stalling economy. Throw in the US trying to replenish the Strategic Petroleum Reserve, and the bulls are currently in the ascendancy, with WTI hitting $92 and Brent $95 before profit taking took the edge off the price. The medium-term trend is still positive, but with so many factors at play, the only guarantee is further volatility.
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