After a very sad week following the passing of Her Majesty Queen Elizabeth II, It seems that whatever is going on with the markets is trivial compared to the somber mood in the UK currently- unfortunately it doesn’t stop global markets so there are some things that I am required to report.
A couple of key things to note- the ECB raised interest rates by 75bps last week, which ended up being another uneventful rate hike on the global scale with the Euro pretty much unaffected by the move- it seems traders are still concerned about the Winter as far as Europe is concerned so we will have to see how the energy situation plays out for Europe as opposed to looking at monetary policy.
Another important event was the New UK Prime Minister, Liz Truss’s plans for energy prices in the UK- the simple way of putting the plan is that it is a price cap of £2500 on energy bills, for the next 2 years, which is a lot better than the planned rise in October of £3549, but higher than what prices are currently. This move has effectively stalled inflation (from an energy perspective)- which will most definitely help with the bigger picture, however, we have to also consider the rising costs in other areas, Sterling has devalued a lot against the Dollar, and the costs of shipping have still been high, but, this could be enough to ensure the UK avoids recession this year.
The Bank of England has moved their meeting to the 22nd of September out of respect, we are still expecting an interest rate hike but we have one more week to see how economics figures come out and how the markets are reacting to Liz Truss’s new plans.
Finally, this week’s data is quite heavy, with UK inflation out on Monday (Expected positive), UK employment out on Tuesday alongside average earnings, and U.S Core inflation out on Tuesday afternoon. The UK will release core inflation numbers on Wednesday. Finally, UK retail sales will be released on Friday- overall this weeks data should give us a good idea of where the Bank of England will go the week after- so I do expect a lot of movement.