ECB, inflation in the US and data from China - these are the main players this week

Monetary policy in the euro zone and the USA and the condition of the Chinese economy. This, in a nutshell, will be the life of the financial markets in the coming week. This also applies to the domestic currency market, which may still be discounting the recent change in monetary policy by the Monetary Policy Council (MPC).

Interest rates in the Eurozone

On Thursday, the decision on interest rates in the euro zone will be made ECB. After the latest data from Europe showed a strong slowdown in the service sector, the only economic sector that still kept the Euroland economy afloat, a pause in interest rate increases became certain. The market expects that the ECB will leave the deposit rate at 3,75% and keep the refinancing rate at 4,25%. This should already be included in the prices. The only question is what's next. Will it be just a pause in increases aimed at bringing HICP inflation in the euro zone to the target from the current level of 5,3 percent? R/R? Or maybe the end of price increases because the risk of recession in Europe is too high? Investors will look for answers to these questions in the statement after the ECB meeting and at the press conference of the head of the central bank, Christine Lagarde. Currently, the market estimates the chances of a rate increase this year at around 70%, and sees reductions as early as March 2024.

US inflation data

This week, financial markets will be concerned not only with interest rates in Europe, but also in the USA. This is due to the inflation data published on Wednesday and Thursday, which will be the last such important publication before the meeting of the US scheduled for September 19-20. Federal Reserve (Fed). According to forecasts, CPI inflation will increase to 3,6% in August. with 3,2 percent Y/Y in July, and core CPI inflation will decrease to 4,3%. with 4,7 percent PPI inflation is expected to increase to 1,2% in August, according to market expectations. from 0,8 percent a month earlier, and core PPI inflation is expected to drop to 2,2%. with 2,4 percent R/R.

Due to the fact that increases in the main measures of both inflations will result from the extinction of base effects, markets will primarily focus on core inflations, assessing on their basis not only the probability of ending the cycle of increases in the cost of money in the US, but also the possible date of starting policy easing. monetary.

Retail sales, data from China

They will also be published this week retail sales data and industrial production in the USA. However, they will not have as much direct impact on expectations related to Fed policy as the inflation data, so they will probably not cause excessive emotions.

The August data on industrial production (forecast: 3,9% Y/Y) and retail sales (forecast: 3,0% Y/Y) in China, as well as other data and reports, will certainly be closely watched. from the Middle Kingdom. The markets are still betting on the condition and future of the Chinese economy, or rather on whether the local authorities will be able to stimulate economic growth and push the country onto a path of faster development, while minimizing the risks associated with, among others, with the local real estate market.