Week of September 26

The last week of Q3 will be one of fewer economic releases to digest the effects of rate policy changes and look forward to the next quarter.

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The week in review

Almost all central banks raised rates as expected last week, collectively providing over 500bps of tighter policy worldwide.

The Fed hiked by 75bps and warned that further hikes were coming. Powell also singled out the potential of a "correction" in the housing market. The SPX 500 has added another 5% to its losses from the previous week, totalling a 10% drop since 4160. 3880 is now key resistance, with 3630 back in focus.

The Bank of England had a three-way split on the vote, hiking 50bps as expected. The pound crashed to a 1985 low at $1.12, paving the way to $1.10. $1.14 is key resistance for the short-term.

The Bank of Japan intervened in the exchange rate for the first time in over a decade after USD/JPY reached 146.00, a 25-year high. The instruction by the Ministry of Finance to halt the depreciating yen brought the price down to 140.00, where it bounced and currently fluctuates around 142.00 ahead of the next big move. 144.00 is short-term resistance.

Risk appetite took a hit after Putin announced partial mobilization and vowed to defend territories in Ukraine that were in the process of being annexed.

Ford is the latest company to join firms pre-announcing results and cutting outlook.

The week ahead

Politics takes over

A snap election in Italy this weekend could usher in a new right-wing coalition government for the country. The election comes after the fragile government led by technocrat and former ECB President Mario Draghi’s fall apart this summer. After the ‘shock’ right-wing populist result in Sweden, a repeat in Italy bring about a new era of Euroscepticism and add pressure to the already beaten down EUR.

Ukrainians have already begun voting in ‘annexation votes’ that will carry on into next week. The referendums will be supervised by Russia in the four occupied/liberated regions of Luhansk, Donetsk, Kherson and Zaporizhzhia and are expected to see them become part of Russia. Russian President Putin warned his country could use nuclear weapons in response to any attack on its territory, including the four new regions.

Lots of EU data

Data is relatively sparse throughout the week, but there is a series of key data points from Europe towards the end. Germany and France report monthly inflation figures, which are expected to show another increase, with Germany's harmonized CPI expected to show an annual rate of 9.6% compared to 8.8% in August.

Germany also reports employment figures, with the unemployment rate expected to tick up a decimal to 5.6%. Eurozone inflation is expected to show an annual rate of 9.4%, above the record 9.1% recorded in August. EUR/USD is at its lowest since 2002 below $0.9800, with round levels breaking but still of note. Parity is significant resistance and a determinant of future price action.

Other data and earnings

From the US, Durable Goods is likely to be the biggest market mover, expected to show a decline. Michigan Consumer Sentiment is expected to rise once again. Personal spending for August is also likely to show an increase.

Along with the last trading day of the quarter, Friday comes with a series of critical economic releases starting with Chinese NBS PMIs, which are expected to show a modest increase. Caixin Manufacturing PMI, like its official counterpart, is expected to remain in contraction despite the rise.

The BOE also publishes monthly mortgage approvals, and there is the final reading of UK Q2 GDP figures.

A light earnings calendar sees releases from Nike, Next, Bed, Bath & Beyond, Intuit Wetherspoons, and Amazon's hardware day.

On Wednesday Porsche will have its IPO.