Energy concerns took a breather after Russia offered to release more natural gas to Europe, but there wasn’t much relief in the FX market. USD continues to outperform as investors bet this crisis will hit Europe and Asia harder than America. The upcoming week seems quite exciting, with a barrage of crucial US data alongside the latest Fed minutes.
The highlights:
In America, inflation numbers will hit the markets Wednesday, a few hours before the minutes of the latest FOMC meeting. Then on Friday, retail sales stats will reveal how the consumer is holding up. All this will be crucial for USD, which has dominated the FX market lately as traders looked for shelter from the energy crisis.
In the UK, employment and GDP numbers for August will be released on Tuesday and Wednesday, respectively. As for GBP, the outlook seems neutral here as markets have already priced in aggressive rate increases by the Bank of England for next year.
Meanwhile, China’s trade and inflation data on Wednesday and Thursday, respectively, will reveal whether ‘stagflation’ risks are materializing, as a painful hangover in the property sector threatens to slow growth while power shortages keep inflation hot.
Oil had an amazing week, with WTI futures reaching new multi-year highs in sympathy to natural gas, which has gone parabolic. Meanwhile, gold prices were lifeless.
Stock markets staged a powerful comeback as energy fears cooled a little, but whether this rebound is sustainable will depend on the earnings season that begins next week.
