Volatility Looms as Key Events Unfold

Financial markets are grappling with uncertainty as they navigate through a series of pivotal events. From looming CPI data to UK wage growth, OPEC's monthly report, and the ECB's policy outcome, investors are on edge. Meanwhile, the threat of a potential government shutdown in the US adds to the risk-off sentiment, impacting tech stocks.

Key Factors for Today

• Markets await crucial CPI data, causing equities to turn bearish while the dollar remains flat.
• UK wage growth, despite job losses, puts pressure on the BOE and weighs down the pound.
• The ECB's policy outcome remains uncertain, reflecting speculation in the Eurodollar market.
• The possibility of a US government shutdown dampens risk appetite, leading to a slide in tech stocks.

Market Movers

• Global equities faced pressure on Tuesday, with both the US and Asia seeing red.
• The US dollar remained subdued ahead of Wednesday's CPI data amidst yield curve flattening.
• OPEC's monthly report sends crude oil to 10-month highs, nearing the $90 per barrel mark.

Economic Calendar

• GB GDP MoM and 3-Month Average
• GB Manufacturing and Industrial Production
• EA Industrial Production
• US CPI Inflation Rate
• EIA Crude Oil Stocks Change

The Big News

UK Wage Growth Puts Pressure on BOE and British Pound

In a surprising turn of events, the UK lost 207,000 jobs in July, significantly surpassing the expected 66,000 loss. This pushed the unemployment rate up to 4.3% from 4.2%. However, the silver lining was the unexpected growth in average wages, which is now pressuring the Bank of England (BOE) to consider further rate hikes. This tighter policy outlook raises concerns about the UK's economic stability, resulting in a decline of the pound. The GBP/USD pair closed nearly unchanged but 0.17% lower, hovering close to the regional support of $1.2445. A break below $1.2530 may expose $1.2565.

OPEC Monthly Report Boosts WTI to 10-Month Highs

OPEC's monthly report had a mixed impact on oil markets. While the oil production cartel reduced its demand outlook for this year by 0.1 million barrels per day, it also predicted a significant drop in global inventories, expecting them to decrease by 3.3 million barrels per day in the next quarter. Additionally, the report revealed a 1.8 million barrels per day shortfall in the last quarter, boosting West Texas Intermediate (WTI) by 1.75% to reach $87 per barrel. With $90 per barrel in focus, oil markets remain influenced by supply-demand dynamics, as the EIA increased its forecast for global demand growth by 0.5 thousand barrels per day.

ECB Policy Outcome Reflected in Futures and Eurodollar

The European Central Bank's (ECB) upcoming policy decision remains shrouded in uncertainty. Reports suggest that members of the ECB's policy-setting committee have no clear insight into the meeting's outcome. Futures markets are pricing in a 50-50 chance of a 25-point rate hike at the Thursday meeting, and the Eurodollar market reflects this sentiment. The Eurodollar pair closed largely unchanged at $1.0753, following a 0.41% slide during the Tuesday session to $1.0706. The pair continues to hover just below the $1.08 mark, with attention on the round resistance level.

Potential US Government Shutdown Weighs on Risk Appetite

House of Representatives are becoming increasingly challenging, posing a risk of a government shutdown with limited legislative session days left before the end of the month. This uncertainty has dampened risk appetite, resulting in a reversal of Nasdaq's gains from Monday. The tech-heavy index has slipped to 15,290, reflecting the prevailing risk-off mood. Unless bulls can retake the 15,400 level, further downside may be in store.