The ECB’s interest rates decision expected today

GBP

Following the appointment of the UK’s new Prime Minister, Sterling has found much needed stability in recent days and returned to pre mini-budget levels. There are still many issues that need to be addressed, the main one being the government’s plans to plug the current £35bn debt hole.

Yesterday, current Chancellor Jeremy Hunt and PM Rishi Sunak announced that the UK’s fiscal statement will be delayed to November 17th after it was initially brought forward by former Chancellor Kwasi Kwarteng. While the exact details of the budget are yet to be confirmed, Sunak indicated that tackling inflation and reducing debt will be the focus.

The Bank of England have been informed of the delay ahead of next week’s interest decision. At present, it is unlikely the bank will move for a large rate hike next week which may leave Sterling vulnerable given other central banks’ hiking cycles.

USD

Across the pond, the US are expected to report that their economy grew in the three months to September with the latest GDP reading. Q3 GDP is expected at 2.4%, reversing the negative trend from the previous two quarters. Should this occur, the US will no longer be in a technical recession. This leaves the door open for the Federal Reserve to continue with their fast-paced rate hike cycle moving forward. The Fed will announce their next rate decision next week.

EUR

The European Central Bank is set to deliver their latest rate decision today. Markets are expecting a rate rise of 75 basis points. This will bring rates up to 2% across the bloc. The ECB have been rapidly raising rates but for how long can they do this? Markets also expect ECB President Lagarde to deliver a dovish message in the commentary afterwards. A move to a data-dependent approach moving forward for the EU bloc may be on the table.

Key announcements

13:15 – EUR – Main Refinancing Rate (Forecast 2.00%) (Previous 1.25%)

13:15 – EUR – Monetary Policy Statement

13:30 – USD – Advance GDP q/q (Forecast 2.3%) (Previous -0.6%)