Producer inflation in Germany, the largest economy in the Euro Zone, increased above expectations in August. We can say that the 20.4% increase in energy prices is the main factor of the high inflation. The biggest producer price increase since 1949, when the data started to be kept, shows that inflation pressures in Europe’s largest economy will ease in the near future. The region’s currency, the Euro, continues to be under pressure ahead of the Fed’s interest rate decision to be announced tomorrow. The pair slipped below the 1.00 band towards the US session. German 2-year government bond yields reached their highest level in 11 years.

While the US Dollar index maintained its strength near its 20-year high, selling pressure prevailed in the US stock market indices and the German Dax30 futures index. The upward trend in US bond yields continued today. The 10-year yield rose to 3.58% from February 2011, while the two-year yield rose to its highest level since November 2007

When we look at the data announced on the US side, construction permits fell sharply and pointed out that the housing market has slowed down. The permit requested in August decreased by 10% and experienced the sharpest decline since May 2020. The permit received was 1 million 517 thousand, and this figure was recorded as the lowest level after September 2020. In Canada, another important economic power in the North American continent, inflation slowed down in August. Headline inflation increased by 7.0% on an annual basis, below both expectations and the previous period. 

The Swedish Central Bank, Riksbank, surprisingly increased the policy rate by 100 basis points to 1.75 percent. This was the largest rate hike since November 1992.