Trading Plan – Monday 19th September 2022: Three central banks heave into view

Mark NugentSept 2022, Trading Plan

Trading Plan – Monday 19th September 2022: Three central banks heave into view

Good morning.

Last week was all about US inflation and, therefore, the Fed (again). Year-on-year inflation came in at 6.3 percent against an expectation of 6.1 percent. This prompted the markets to think it more likely the Fed will go for a bigger hike at the meeting this Wednesday. Predictably, the USD rose, and equities fell.

The other important event last week was the European Commission getting to grips with energy prices in the Euro-zone. The ongoing war in Ukraine and the permanently parlous state of some of the bloc’s economies make recession in the Euro-zone a real danger and the Commission will want to be seen to be acting where it can.

I had one trade last week, WTI long, which closed out at breakeven.

This week is all about central banks. We have rate announcements and statements from the US Fed on Wednesday, and the Banks of England and Japan on Thursday.

There are different dynamics at play. In the US, we have a strong employment and retail sales position, allowing the Fed to feel more comfortable with larger hikes without tipping the economy into recession.

In Japan, we have low but increasing inflation which the BoJ have already alluded to and are getting increasingly uncomfortable about. Interest rates have been at -0.1 percent for over 6 years. That may be about to change, although probably not on Wednesday. The statement will be more important.

The Bank of England has previously said that the UK economy cannot take too many more hikes. Yet, last week, inflation came in at 9.9 percent, missing the expectation but clearly the bank will feel a response is required. A 50 basis-point hike is expected.

That covers most of the fun to be had this week. As always, I go over my trading themes for the week in the video.

I’ll be back tomorrow.

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