Central banks in focus this week

Sterling lost ground against both the dollar and the euro last week and kicks off this week trading at around $1.14 and just below 88p respectively, while the single currency continues to trade in and around parity against the dollar

Government bond yields headed further north last week. US 10-year yields led the way, increasing by another 15bps to around 3.45%, while equivalent German and UK yields were both circa 5bps higher at 3.15% and 1.75% respectively

The Fed holds a two-day monetary policy meeting this Tuesday and Wednesday with another 75bps hike (at least) in interest rates in the offing, which would take them to a range of 3.00% to 3.25%

The Bank of England announces its latest interest rate decision this Thursday (postponed from last Thursday owing to the Queen’s death), with the market split between whether it will hike by 50bps (as in August) or up it to 75bps. Meanwhile, the new Chancelllor of the Exchequer, Kwasi Kwarteng, will present a ‘mini budget’ this Friday

ECB Chief Economist Philip Lane says the central bank is likely to raise interest rates ‘several’ more times over the remainder of this year and into next year, with his colleague Joachim Nagel (head of Germany’s Bundesbank) saying “we must bring inflation back under control…we mustn’t let up, even if the economy worsens”

Economic data of note this week includes flash PMIs for September for the Euro area, UK and US, due on Friday