Here is what you need to know on Monday, September 20:
Markets are in risk-off mood, benefiting the dollar and weighing on stocks, commodities and also cryptocurrencies. The woes of China’s Evergrande stand out ahead of the Fed decision later this week.
Evergrande, the second-largest real-estate firm in the world’s second-largest economy is in financial distress and authorities are uneager to bail it out. While markets in China are closed due to a holiday, stocks all over the world are down in fear of a wider crisis in China’s real-estate, and implications for global growth.
The embattled firm is already offering unfinished property as payment for its huge $300 billion debt mountain and may miss a substantial debt payment on Thursday.
Commodities used in construction are falling and also gold remains on the back foot, changing hands at around $1,750. WTI Crude Oil is trading around $71, off the highs.
The safe-haven dollar has been extending its gains, pushing EUR/USD toward 1.17 and GBP/USD 1.37. The rout has also extended to cryptocurrencies, with Bitcoin changing hands at aroudn $45,000, Ethereum to $3,200 and Ada to $2.20.
Worries about soaring gas prices and even potential blackouts during the winter have been weighing on both the euro and the pound. Several small British energy firms have collapsed while European policymakers are stuggling with higher costs and public anger.
The Federal Reserve is set to leave its policy unchanged on Wednesday, but signal when it intends to taper its $120 billion/month bond-buying scheme. Tensions are mounting ahead of the decision, with analysts divided over the taper timing, November or December. Somewhat softer inflation and a hiccup jobs report contrast robust retail sales.
See Fed Preview: Three ways in which Powell could down the dollar, and none is the dot-plot
Elections: Canadians go to the polls on Monday in a snap election. Prime Minister Justin Trudeau is set to prevail, but to lead a minority government once again. Voters are angry with the PM over his decision to call them to vote and the pro-business Conservatives could surprise and return to power. USD/CAD is trading close to 1.28.
Later in the week, the Bank of England and preliminary Purchasing Managers’ Indexes are eyed. Germans go to the polls on Sunday, with finance minister Olaf Scholz leading to succeed to long-serving Chancellor Angela Merkel.