Summary:
- Markets hot on Monday after Bolsonaro win and China reserve cut
- US inflation, ECB minutes key for the EURUSD this week
- Oil in the spotlight after OPEC comments, inventory data due on Thursday
This Monday starts very lively as three major stories intersect each other: US Treasury yields remain high despite a mixed NFP report on Friday, Chinese assets are on the selling block after the reserve ratio cut and Brazilian markets are expected to be in euphoria after a massive lead of Bolsonaro in a presidential race. That will overshadow minor economic reports that are in the pipeline for today. The EMU Sentix barometer is the only one worth attention (9:30pm BST, consensus 11.7 points).
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USDBRL will be under the radar today as markets will digest a massive lead of Jair Bolsonaro in the presidential race. Source: xStation5
When it comes to the full week the CPI inflation reading from the United States will draw the biggest attention but traders should also take their time to analyze the protocol from the latest ECB meeting. Both reports to will be released on Thursday. Moreover, oil data will be released with a one day delay this week therefore all major economic readings will be accumulated on the same day.
CPI inflation from the US (Thursday, 1:30 pm BST)
A continuous improvement in the US price growth dynamics started in the second half of 2017 and encouraged Fed policymakers to take a gradual rate hike approach. However, inflation report for August saw both headline and core CPI gauges unexpectedly pull back. Macroeconomic environment and geopolitical issues should support rising prices therefore the latest weaker reading could be just a one-off event. However, in case we see another deceleration in price growth dynamics questions may be raised over the pace of the future rate hikes. Affected markets: US500, GOLD.
ECB minutes (Thursday, 12:30 pm BST)
The latest ECB meeting did not provide investors with any kind of surprise. The Bank left rates unchanged and Mario Draghi reaffirmed his confidence in the economy during press conference. However, the President of the ECB expressed upbeat remarks on inflation few days after the meeting. These comments sent euro significantly higher before it plunged on the back of European political issues. Investors will now analyze the protocol from the Governing Council discussion to see whether confidence in the inflation picking up was just Draghi’s point of view or is it a common stance among ECB members. Affected markets: EURUSD, DE30.
Oil inventories (Thursday, 3:30 pm BST)
A stunning rally on the oil market was put on hold last week after the United States once again asked OPEC to boost production. While this was nothing new oil bears became more active after Saudi Energy Minister announced that OPEC cartel is ready to use its spare production capacity if only it is needed. Notice that inventories data will come with a one day delay this week as federal holiday will be held in the US on Monday. Affected markets: OIL, OIL.WTI.
