Regional markets are firmly back in hawkish mode following recent remarks from the Federal Reserve chair and a renewed escalation in the ongoing conflict between the United States and Iran. With United Kingdom markets having been closed and trading across the Central and Eastern European region remaining subdued, some degree of catch-up is anticipated today. In Poland, inflation figures for August surprised to the upside, climbing from 3.0 percent to 3.4 percent, primarily driven by higher fuel prices. This upside surprise occurred because the national statistics office likely did not account for the government reduction in VAT implemented during the latter part of the month. Conversely, food prices experienced further declines, which provides a more dovish signal regarding inflationary pressures elsewhere across the region.
Wage Growth and Inflation Forecasts
Looking ahead to Thursday, the Czech Republic is scheduled to release its second-quarter wage data, where growth is projected to moderate from the unexpectedly strong 8.1 percent figure recorded during the first quarter. Additionally, Turkey is set to publish its August inflation figures, with forecasters anticipating only a modest month-on-month decline from 1.8 percent down to 1.6 percent. Moving on to Friday, Czech inflation is expected to tick upward from 1.7 percent to 1.9 percent, bringing it directly in line with the central bank own forecasts. Simultaneously, both the Czech Republic and Hungary are preparing to release their latest retail sales data. The Czech market continues to price in nearly four distinct rate hikes, while the Polish market prices in almost three, a dynamic that should successfully limit further currency weakening and potentially support gains today given the ongoing widening of rate differentials against the euro.
Foreign Exchange and Major Currency Pairs
During the European session, the GBP/USD currency pair trades with mild losses hovering beneath the 1.3550 threshold. The US Dollar has managed to recover some ground amidst persistent tensions in the Middle East alongside hawkish expectations surrounding the interest rate outlook of the Federal Reserve, thereby weighing on the pair ahead of incoming US economic releases. In a similar fashion, the EUR/USD pair struggles to capitalize on its overnight bounce, trading below the 1.1600 level during the European session on Tuesday. Data originating from the Eurozone indicated that annual HICP inflation rose to 3.3 percent in August compared to 2.9 percent in July, matching market expectations precisely, whereas core HICP inflation edged slightly lower from 2.5 percent to 2.4 percent over the same period. Later in the day, the US economic calendar will feature the release of JOLTS Job Openings and ISM Manufacturing PMI data.
Gold, Cryptocurrencies, and Technical Outlook
Gold maintains modest intraday losses clustered around the $4,430 region as the market heads further into the European session, remaining within striking distance of a one-and-a-half-week low touched during the previous day. Comments delivered by US Federal Reserve Chair Kevin Warsh last Friday significantly lifted market bets for an imminent interest rate hike, which subsequently undermined the non-yielding precious metal. Meanwhile, digital assets including Ripple, Cardano, and Dogecoin remain under pressure following double-digit losses sustained last week, as they test crucial Exponential Moving Averages for immediate support. The technical outlook warns of continued downside risks for XRP, ADA, and DOGE as overall bullish momentum dissipates. Live market data indicates that XRP ($XRP-USD) currently trades at $1.37, down 0.98 percent from its previous close of $1.38, within a 52-week range of $0.9884 to $2.41 and a volume of 0.52x the 20-day average. Technical indicators show a 14-period RSI of 61 and MACD at 0.08 versus a signal line of 0.09, reflecting a bearish histogram.
Manufacturing Data and Diesel Market Pressures
Market attention shifts toward the Tuesday release of the August ISM Manufacturing Purchasing Managers Index, widely regarded as one of the most closely followed indicators tracking activity within the US manufacturing sector as well as an essential barometer for the broader economy. Market participants anticipate that the headline index will deteriorate slightly to 55.2 for the month of August. While the broader oil market may outwardly appear calmer than it did several months ago, the diesel market is transmitting a starkly different message. The US diesel crack spread, defined as the premium commanded by ultra-low sulphur diesel futures over WTI crude, recently surged above $100 per barrel for the first time in history, reaching an intraday record high of just over $102.00.
