Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
read more
SHARE
There were no surprises on the American inflation front last week. Both the producer and consumer price indices fell almost dead in line with expectations, with the core component of the CPI edging marginally higher than anticipated month-over-month. The combined reports all but cement a rate hike on Wednesday. In what is likely to be a huge week for central banks around the world, the Federal Reserve, Bank of England and Bank of Japan are all scheduled to deliver their verdicts within a 48-hour period. FedWatch is now leaning towards a 90% chance of a 25-bps rate hike, which would push interest rates on the dollar to the 3.75-4.00% range. The Bank of England is not expected to budge on Thursday, and rates on the pound are likely to remain at 3.75% until November at the earliest, despite inflation rising to 2.9% in July. Finally, the Bank of Japan is forecast to raise rates on the yen on Friday morning, pushing the official target rate on the Japanese currency to 1.25%.
Markets are generally confident enough in the above predictions that any deviation will cause significant movement on the affected pairs. Beyond the decisions themselves, the attached commentary will also play a part in interest rate forecasts over the rest of the year and into the next. According to reports emerging out of the City of London on Friday, the BoE could hike interest rates no fewer than four times in 2027 and may start doing so as early as November. Rate decisions aside, the rest of the economic calendar is relatively barren this week, while the earnings schedule is devoid of life entirely.
The situation in the Middle East is as tumultuous as ever. While Iran and neighbouring countries continue to play a central role in the conflict, attentions are increasingly turning to Yemen and Saudi Arabia. The Houthi faction gained a significant foothold on the Red Sea last week, seizing strategically important coastal towns as well as Perim Island, which sits in the narrowest part of the Bab al-Mandab Strait. The additional rebel presence is bad news for international shipping companies seeking to transit the passage, putting further pressure on oil deliveries. To make matters worse, Saudi’s East-West pipeline was the victim of a drone strike last Thursday and has since been shut down. Crude oil prices underwent a moderate correction on Friday following the stretch to $110 the day prior, but Brent Crude is back on the front foot as of this morning, opening the week at $107 per barrel.
Given the scale of the problem, market participants could be forgiven for wondering why oil prices are not higher still. The International Energy Agency may have an answer. According to the agency’s forecasts, the world is likely to see a drop in demand to the tune of 2.5 million barrels per day in 2026, exceeding previous estimates of 1.6 million BPD. A reduction in global demand, coupled with nations tapping into their accumulated strategic reserves, has so far kept something of a lid on oil prices, but said reserves can only endure for so long.
The endlessly delayed Clarity Act will face a procedural vote on Tuesday, in what is looking like a do-or-die moment for the beleaguered bill. Senate Republicans released a new version of the legislation just last week, meaning the bill is still being worked on ahead of this week’s vote. The Clarity Act will need to secure 60 votes tomorrow, failing which, the odds of the bill passing this year will realistically drop to zero. Republicans currently hold 53 seats, requiring a sizeable contingent from the other side of the aisle to cross over. Prediction markets are not optimistic, with Polymarket advertising a mere 26% chance of the bill being enshrined into US law this year. A surprise ‘yes’ vote on Tuesday could provide some serious momentum to cryptocurrency prices.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.
Trading derivatives and leveraged products is high risk and may result in losses exceeding your initial investment. Read our T&C and PDS before trading.
OPEN ACCOUNT