Industrial production is increasing, and expectations regarding interest rates are changing.
Recent data from the USA indicates a significant increase in industrial production by 0.7% month-on-month, which significantly exceeded analysts' forecasts of 0.3%. This suggests that the American economy continues to show signs of resilience, which may prompt the Fed to take further steps towards normalizing monetary policy. Futures on interest rates now indicate over a 50% probability of a rate hike by January, meaning that investors are beginning to prepare for a possible tightening of policy by the Fed. These changes in expectations may impact the valuations of risk assets, such as stocks, as well as the exchange rate of the US dollar.
Donald Trump's statements about Iran, in which he agreed to suspend Iran's nuclear program for 20 years, but on the condition that it will be a 'real' commitment, have also been in the spotlight. These declarations may influence sentiment in the commodity markets, particularly in the context of oil prices, which are sensitive to the geopolitical situation in the Middle East region. Stabilization in relations with Iran could reduce geopolitical risk, which could translate into a decrease in the risk premium in oil prices.
The latest data on the Japanese Producer Price Index (PPI) indicates a significant increase both year-on-year and month-on-month. The year-on-year PPI stood at 4.9%, well above expectations of 3%, which may indicate inflationary pressures in the Japanese economy. The rise in producer prices could influence the monetary policy of the Bank of Japan, which may be forced to consider changes to its ultra-loose monetary policy, which in turn could have implications for global capital flows.
Tomorrow will bring further observations of market expectations regarding Fed policy, particularly in the context of the upcoming FOMC meeting. Investors will also closely monitor the geopolitical situation, especially regarding US-Iran relations. Additionally, macroeconomic data from other key economies will impact global investment sentiments.
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