Dollar, oil and desperate BoE

FX_IDC:XAUUSD   Gold Spot / U.S. Dollar
Set to take risk

The reassessment of possible damage from Hurricane Irma in a positive direction and the project signed by Trump on providing aid to the victims extended the period of optimism in the US stock exchanges.

The S & P 500 index seems to have fallen into dependence on any positive news, updating records. The dollar remains in limbo, sellers made a halt after a long descent, as the situation with the Fed remains very uncertain. Activity will likely resume after Friday's CPI data. News from the Korean peninsula can also return sellers control over the dollar, taking into account the sanctions imposed by the UN Security Council on Monday.

Prices for oil and natural disasters

The oil market is optimistic about the restoration of the refinery in the US, fueled by rumors about a possible extension of the OPEC + pact until March 2018. Russia second largest oil supply nodded after Minister's Novak hints, now the turn for OPEC. In the short term, oil surplus in the US market may increase due to a fall in demand in the region affected by the hurricane, which will be reflected in the API and EIA reports as an increase in inventories.

Can not escape inflation

After a relative lull on the inflation front, the August price increase in the UK by 2.9% became the maximum in five years. The Bank of England was again under pressure, because:

Preservation of incentive measures in the form of low rates can further accelerate the growth of inflation .

The widening gap between wage growth and rising prices will force households to reduce consumption, but what’s worse - will worsen inflation expectations, which will lead inflation to an uncontrolled trajectory.

Accordingly, the only solution for the Bank of England is to raise the rate despite all the concerns. The pound sterling accordingly reacted by a growth of 0.7% laying the prospects for tightening the policy.

Arthur Idiatulin
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This analysis is provided as general market commentary and does not constitute investment advice.
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