Morning deal: UK CPI first, then Jerome’s turn

A look at the coming day in European and global markets from Tom Westbrook

Jerome Powell today has a needle to thread between markets eager to peak interest rates and rising energy costs that are causing an unwanted return in inflation.

If Fed members also stick to June projections for rate cuts in 2024, then their explaining task becomes even more complicated, as they will be pressured to set the conditions for lowering rates, while also You leave your hands free to raise them if necessary.

Markets expect the Federal Reserve keep rates on holdbut they have priced about a 40% chance of another increase by the end of the year.

Canada rebound larger than expected Falling consumer prices, driven by rising gasoline costs, could provide useful evidence for the Federal Reserve to err on the hawkish side of rate setting.

Markets have roughly doubled the likely risk of a surge in Canada to around 40% after annual headline inflation jumped to 4% in August from 3.3% the previous month.

Higher energy prices could also trigger a surprise in the UK CPI at 0600 GMT, where economists expect the year-on-year figure to rise to 7% in August from 6.8% in July.

The British pound has found support in the risk of a positive reading, with Brent crude futures up 32% in the last three months, pointing to bullish risks and more chances that Bank of England raises rates beyond the expected increase on Thursday.

Investors were playing the waiting game in Asia. Stocks fell. Porcelain refused to reduce rateswhich affected Chinese stocks, while currency trading remained in a holding pattern.

Chinese developers Sunac (1918.HK) and country garden (2007.HK) brought some relief to the crisis-hit real estate sector through debt agreements with creditors, but the outlook remained clouded by uncertainty over a recovery in home sales.

It’s all up to you, Jerome.

Key developments that could influence markets on Wednesday:

British CPI

Federal Reserve policy decision and press conference

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