In addition to new US inflation data, investors have had to process the latest ECB interest rate decision and the associated projections over the past few trading days. All in all, however, investors on both sides of the Atlantic may have had a satisfactory week. In the meantime, market participants are likely to be getting in the mood for the upcoming Fed meeting next Wednesday.
DAX Chart
Source: Tradingview
German inflation falls below 2 percent for the first time in over three years
Hopes of a looser monetary policy from the ECB in the future were fueled on Tuesday by new inflation data for the Federal Republic of Germany. For the first time in over three years, inflation was back below the two percent mark at 1.9 percent (year-on-year), according to a preliminary assessment by the Federal Statistical Office.
US core inflation remains stubborn - interest rate cut fantasies in the US remain manageable
As expected, it was US consumer prices that kept stock markets around the world busy in the middle of the week.
The inflation rate, including the drivers energy and food, rose by 2.50% in August compared to the same month last year, which was less than expected (2.60%) after 2.90% in July. However, core inflation remained at 3.20%, the same level as the previous month.
ECB cuts interest rates as expected - outlook remains vague
In response to falling inflation, the European Central Bank (ECB) lowered the so-called deposit rate by 25 basis points to a level of 3.50 percent on Thursday afternoon, as expected. The deposit rate, which banks receive when they park surplus liquidity with the ECB, is considered to be trend-setting.
However, the future direction of monetary policy remained open: "The Governing Council of the ECB does not commit itself in advance to a specific interest rate path."
The main refinancing rate, at which commercial banks can borrow money, fell by 0.60 percentage points to 3.65%. The reduction is expected to stimulate new growth.
Also in the spotlight on Thursday afternoon were fresh US producer prices, which rose by 0.20% in August compared to the previous month, twice as much as expected. This data is also seen as an important indication of future inflation trends.
Focus on Michigan consumer sentiment - investors likely to tune into Fed meeting
Last but not least, preliminary data on consumer sentiment from Michigan is on the agenda today (16:00).
The US Federal Reserve (Fed) will meet next Wednesday to decide on the future key interest rate level in the United States. Investors are betting on an interest rate hike of a quarter of a percentage point to 5.00-5.25% and thus the long-awaited turnaround in interest rates.
