Last week, critical data came out. Consumer Sentiment in the US improved slightly in September, helped by lower gas prices. The actual preliminary reading rose to 59.5 this month, against the consensus prediction of 60.0, but up from 58.6 in August.
Additionally, the inflation expectations proved durable at 4.6% in September against 4.8% in August. Hence, it was a mixed picture, and the question remains the same. Is there any likelihood that the Fed will raise the interest rates on Sept. 21 to a full percentage or only three-quarters like the previous two meetings?
One possibility is that sentiment should rise further, with gas prices declining. So, the Fed should hike the rates only by 75 basis points on Wednesday. On the contrary, rising interest rates, recession concerns, and the labor market’s imminent softening could reduce the improvement in confidence.
The major U.S indices were trading lower with S&P 500 shedding -4.77%, Dow Jones Industrial Average -3.78%, and NASDAQ Composite -5.77% last week. In Europe, similarly, the German ZEW Economic Sentiment, and the EU ZEW Economic Sentiment fell below the analysts' forecast, and the previous reading in August reached -61.9 and -60.7 from -55.3 and -54.9 respectively.
DAX dropped -2.65% last week, although the facts with the issues in the flow of natural gas and the weakened euro indicate an increasing possibility for a recession in Europe than in the USA.
The Economic Calendar has interesting events lined up this week, including the RBA rate decision. The RBA may not be that hawkish anymore, so Aussie may have issues recovering, especially with lower stocks.
Other key events apart from the hike in interest rates from the Fed are as follows: the U.S Housing Market Index for September, the Japan Core CPI for September, the German PPI for September, the U.S Building Permits for September, the ECB President Lagarde speaking, the U.S API crude oil stock (weekly), the US Home Sales for September, the BOJ Interest Rate Decision, the BOE Interest Rate Decision, and the Manufacturing PMI in Eurozone, Germany, Great Britain, and the US.
From a technical perspective, we think that the USD remains king as S&P 500 breaks the trendline support. The US yields also scream for that 3.5% breakout which can cause more fear across different markets, including cryptos.
