Week Ahead: ECB Rate Hike Hangs in the Balance; US CPI Could Edge Up Again

 | Sep 08, 2023 08:46AM ET

The European Central Bank is headed for a crunch rate decision next week amid rising recession risks and the job on inflation not yet done. It’s going to be a big week for the US dollar as well, as the CPI and retail sales reports are due before the Fed’s September meeting. There’s a barrage of UK data that will keep the pound on its toes before the next Bank of England decision, while the market mood will also be swayed by some key economic indicators out of China, as fears about the health of the world’s second largest economy persist.


Recession fears come back to haunt the euro

After an impressive uptrend that stretched almost 10 months, the euro’s fortunes took a turn for the worst this summer. A massive rebound in the US dollar has been one of the thorns on the euro’s side. Another is the deteriorating outlook for the Eurozone economy. Following an aggressive tightening campaign that has taken everyone by surprise, borrowing costs in the euro area now stand at their highest since the single currency’s inception. Add to that the weakening demand in Europe’s key export markets, it’s no wonder that growth is faltering. Germany in particular has been hit hard by the sharp slowdown in China and the ZEW economic sentiment index out on Tuesday could underscore all the gloom.

On Wednesday, the focus will be on the July GDP estimate, with industrial production and trade figures also on cue.

Sterling could recoup some of its recent losses should the incoming data ease concerns about stagflation or a recession.

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XM Group Written By: XM Group

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