Financial basis

Morning Auction: Unstoppable Dollar | Reuters

U.S. hundred-dollar bills are seen in this photo taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won/File Photo

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A preview of the day ahead in the European and global markets of Anshuman Daga

The disagreement on interest rate hikes is noticeable.

Two ECB policymakers expressed differing views on the scale of future rate hikes, pointing to some dissent over whether last week’s unprecedented 75 basis point hike should be repeated. Read more

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Investor anxiety about the risks of slowing growth is evident.

The German bond yield curve briefly inverted on Thursday, as German bond yields hit new 11-year highs at 1.539%.

But there seems to be no stopping the mighty dollar, already up 15% against a basket of currencies this year. Fed funds futures now point to a 25% chance of a 100 basis point rise at next week’s meeting.

This supports dollar bulls, who have already beaten the euro and the yen to two-decade lows and the pound to nearly 40-year lows.

Overnight, the World Bank announced grim news.

He warned that the world could be heading for a global recession as central banks around the world simultaneously hike rates to tackle lingering inflation. Read more

While the Fed meeting will be the biggest event for financial markets next week, the regional focus will also be on expected increases from the Bank of England and Bank of Japan.

Asian stocks weakened on bearish economic assessments on Friday, despite data showing surprising resilience in the Chinese economy, with factory output rising faster than expected and retail prices rising at the fastest pace in six months. Read more

Investors seem more concerned about the worsening real estate crisis in the world’s second largest economy.

Meanwhile, a countdown has begun for what could be one of the biggest IPOs in the world. Sources said Volkswagen’s supervisory board (VOWG_p.DE) will meet on Sunday to push ahead with the IPO of its Porsche brand. Read more

The dollar zooms higher

Key developments that could influence markets on Friday:

Economic data: Final CPI for the eurozone in August

Speakers at events: ECB President Christine Lagarde and Banque de France Governor François Villeroy de Galhau; ECB Chief Economist Philip Lane

American University of Michigan Index

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Reporting by Anshuman Daga

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