Brent Crude prices reached near $102 per barrel as Iran are said to be prepared for a more intense war with The U.S. The latest escalation came after what has been the biggest wave of attacks on shipping by both sides so far.
Higher oil prices are contributing further to inflation pressures, with 10-year U.S bond yields holding near 4.85%, notably its highest level since the latter part of 2023. Off the back of this, markets are now pricing in a 62% probability that The Federal Reserve will raise their interest rates by 25-basis points at next week’s meeting.
Turning our attention to this afternoon, we have the The European Central Bank’s interest rate decision. Markets are fully anticipating a 25-basis point hike this afternoon, after August’s inflation increased to 3.3%. The main contributing factor to this was mainly down to energy inflation climbing to 14.3%. Another factor is the borrowing costs for governments throughout Europe, with borrowing costs having hit multi-decade highs over the past few weeks.
Crucially, the press conference shortly afterwards will no doubt have an impact on the market as traders and investors look for any clues regarding future interest rate moves in the coming months. Especially when we consider that inflation will continue to climb as we head into the winter months, as a backdrop of the escalating conflict in The Middle East. With that in mind, any signals towards future rate hikes in the coming months should lead to some Euro strength.
Also worth keeping an eye on, this afternoon we have Producer Price Inflation set to be released in The U.S. Current projections suggest producer prices will have climbed by 0.5% roughly when excluding and including food and energy. We would also expect this to then be reflected in tomorrow’s consumer inflation figures, but neither should have an impact on The Federal Reserve’s interest rate hike probability, as similar with The EU, we know inflation is set to continue climbing into the winter months as energy demand increases.
GBP/EUR 1.1630 GBP/USD 1.3540 GBP/AED 4.9747
GBP/AUD 1.8776 GBP/CHF 1.0962 GBP/CAD 1.8694
GBP/NZD 2.3158 EUR/USD 1.1627 GBP/ZAR 21.7404