UniCredit: Events This Week
Markets face a busy week of political and central-bank events, with Israel’s election unlikely to materially change its foreign policy towards Iran. A close contest between Likud and Gadi Eisenkot’s Yashar party is unlikely to produce a parliamentary majority, leaving coalition negotiations and the possibility of fresh elections. The resulting uncertainty could support the USD. Wednesday’s Fed decision is another key catalyst: we expect rates to remain on hold before a hike in December, with Chair Kevin Warsh’s tone critical. A less hawkish message could keep 10-year Treasury yields below 5% and pressure the dollar, while renewed hawkishness could push yields towards their recent 24-year high of 5.3475%, strengthening the USD and driving EUR/USD towards or below 1.1114. The UK Autumn Budget on Wednesday will test the new Burnham government’s fiscal credibility as higher gilt yields and energy-market volatility erode the Treasury’s limited fiscal headroom, estimated at £12—20bn. The government remains committed to avoiding increases in the main rates of income tax, employee National Insurance and VAT, leaving the Chancellor to balance fiscal rules against spending pressures. Sterlin
Markets face a busy week of political and central-bank events, with Israel’s election unlikely to materially change its foreign policy towards Iran. A close contest between Likud and Gadi Eisenkot’s Yashar party is unlikely to produce a parliamentary majority, leaving coalition negotiations and the possibility of fresh elections. The resulting uncertainty could support the USD. Wednesday’s Fed decision is another key catalyst: we expect rates to remain on hold before a hike in December, with Chair Kevin Warsh’s tone critical.
A less hawkish message could keep 10-year Treasury yields below 5% and pressure the dollar, while renewed hawkishness could push yields towards their recent 24-year high of 5.3475%, strengthening the USD and driving EUR/USD towards or below 1.1114. The UK Autumn Budget on Wednesday will test the new Burnham government’s fiscal credibility as higher gilt yields and energy-market volatility erode the Treasury’s limited fiscal headroom, estimated at £12—20bn. The government remains committed to avoiding increases in the main rates of income tax, employee National Insurance and VAT, leaving the Chancellor to balance fiscal rules against spending pressures.
Sterling could remain vulnerable if investors question the sustainability of public finances. On Thursday, the ECB will face scrutiny over its response to widening sovereign spreads, particularly in France, alongside expectations of tighter policy in December. An inadequate response to bond-market fragmentation could put further pressure on the euro against both the USD and CHF. On Friday, the BoJ is expected to keep rates at 1.25% despite inflation reaching its 2% target, while raising inflation projections and clarifying its plans for policy normalisation.
Markets are already close to fully pricing a December hike to 1.50%, with attention turning to whether rates could rise above 2% by 2027 and continue higher in 2028. A more hawkish outlook could support the yen, while the risk of renewed Japanese or US intervention may limit further yen weakness.