Top 5 Trading and Investing Drivers in September

August 29, 2022 12:58

With September just a few days away, here are the top 5 drivers we’re watching in the US, UK and EU trading and investing markets.

Inflation Rates

The slight drop in annual inflation in the US is cause for some cautious optimism. The question is whether it’s enough to persuade the Federal Reserve to slow its hawkish momentum. At this stage, it seems unlikely. Inflation would have to drop considerably to reassure monetary policy makers whose main job it is to keep inflation at around 2 percent.

The UK’s inflation rate hit double digits, rising to 10.1 percent on an annual basis in July. It seems likely that inflationary pressures will continue into September, pushing the Bank of England (BoE) into more aggressive interest rate hikes.

Inflation in the Eurozone remains a worry for the European Central Bank (ECB), having risen to 8.9 percent in July. With few signs that inflation will slow down the ECB may start taking more hawkish actions to tighten monetary policy, not least by hiking key interest rate benchmarks in September.

Central Bank Interest Rate Decisions

Given the high importance of interest rate changes amid inflationary pressures, we’ve listed the major central bank meetings in September below:

FOMC Meeting: September 20-21, 2022.

ECB Meeting: September 22, 2022.

BoE Meeting: September 15, 2022.

The GBP, EUR and USD currency crosses are likely to see movement during the last two weeks of September ahead of central bank statements.

Gross Domestic Product (GDP) Growth

Can the US exit the technical recession it entered in the second quarter? We won’t know the answer until October 27th, when the Bureau of Economic Analysis (BEA) releases its first GDP reading for the third quarter.

Another pressing global growth question hangs over developments in the UK, where recession fears are growing after GDP shed 0.6 percent in June.

High inflation and reduced spending power due to a weak EUR are risks for the Eurozone’s growth in the short term. 

Geopolitics

The conflict in Ukraine is likely to continue jangling nerves in the trading and investment markets, not least because of bloated fossil fuel prices and uneasy sentiment. The humanitarian and economic costs have taken their toll over the last six months and without a peace deal, the geopolitical impacts may reverberate until the end of the year.

USD Strength

Is crude oil expensive because of demand pushing up inflation or because the USD is so strong against other currencies at the time of writing? This chicken or egg question may be answered in the fourth quarter if inflation continues to decline in the US.

The USD strengthened on safe-haven buying interest after the Federal Reserve started tightening monetary policy. For as long as the Fed is on a hawkish flight path, the USD and USD-denominated assets like crude oil could maintain their strength in the fourth quarter.

Wrapping up our outlook, the trading and investing markets may see more knock-on effects from high inflation, rising interest rates and tightening monetary policy, growth concerns, geopolitics and the strength of the USD.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.