Daily summary: Central banks remain hawkish

• European indices finished today's session mostly higher, except for DAX 40 which fell 0.09% despite the ECB lifted interest rates by 75 bp to 1.25%, the highest level since November 2011, 

• Central bank also revised its inflation expectations higher and lowered growth projections, however despite worsening macroeconomic outlook, none of them show a contraction in the Euro Area’s GDP in the coming years.

• The ECB sources and comment pointed that another 75 bp is not off the table for October if inflation persists,

• British Queen Elizabeth II has passed away.

• UK new Prime Minister Liz Truss announced that the government would cap domestic energy prices for households at £2,500 while limiting them for businesses to ease the ongoing cost-of-living crisis. 

• As a result the yield on Britain’s 10-year Gilt surged past the 3% mark in September, the highest since 2011,

• US indices are swinging between gains and losses during volatile session while investors digest fresh comments from Powell. 

• During a session at the Cato Institute, FED Chair once again repeated that the central bank is willing to do what it takes to tame inflation, further curbing any speculation of an imminent policy pivot.

• Fed Evans said that inflationary pressures have broadened partly because of wages and does not rule out 75 bp rate hike in September

• Today's session on the FX market favored the Swiss franc and the Canadian dollar. The British pound and the New Zealand dollar are the top laggards. The pound and UK bonds are subject to supply pressure as a result of the announced bailout package, the financing of which will most likely require a debt issuance, increasing fears of a rapidly deepening deficit.

• Today we could observe a rebound in the crude oil market. WTI crude price returns to $84 per barrel, and Brent crude oil is testing $89 per barrel. Gold is down by almost 0.5%. US crude oil inventories unexpectedly increased by 8.85million barrels, while analysts expected a decline around 700k barrels.

• Mixed sentiment prevails in the cryptocurrency market today. Bitcoin and Ethereum are losing nearly 0.75%. However, several altcoins are performing much better.

GBPUSD again tested pandemic lows at 1.1425 during today's session, as investors are concerned about the source of funding of the new economic package and many speculate that the UK will simply have to sell more bonds. Bank of America analysts warned that increasing strains on government finances are one of the key long-term headwinds for the currency. On the other hand, former bond king Bill Gross believes USD is overvalued against all currencies and is bullish on GBP. Source: xStation5