European stock markets experienced gains on Wednesday, driven by a notable decline in U.K. inflation, while investors eagerly anticipate the upcoming monetary policy announcement from the U.S. Federal Reserve.
As of 03:40 ET (07:40 GMT), key European indices showed positive momentum: Germany’s DAX index traded 0.5% higher, France’s CAC 40 recorded a 0.1% increase, and the U.K.’s FTSE 100 saw growth of 0.6%.
Decline in U.K. Inflation for August
Earlier today, data revealed that U.K. consumer inflation increased by 0.3% in August, with the year-on-year headline figure unexpectedly dropping to 6.7% from July’s 6.8%. This decline was attributed to decreased hotel prices, airfares, and relatively modest food price increases compared to the same period last year.
While higher energy prices had anticipated pushing inflation to 7.0%, the current slowdown in growth may prompt the Bank of England to hint that the end of its rate-hiking cycle is nearing, despite an expected 25-basis-point increase in interest rates at its upcoming meeting on Thursday.
Anticipation Surrounds U.S. Federal Reserve Decision
Attention today, however, is primarily focused on the U.S. Federal Reserve, as it concludes its two-day policy-setting meeting later in the session. The central bank is widely expected to maintain interest rates within the range of 5.25% to 5.50%, following a series of increases aimed at curbing inflation.
Nevertheless, uncertainty looms regarding future Fed actions, particularly in light of rising energy prices, which could potentially reignite inflationary pressures.
EU Car Sales Continue to Surge
In corporate news, recently released data indicated a 21% growth in EU car sales for August, marking the thirteenth consecutive month of sales expansion as the automotive industry continues to recover from pandemic-related supply chain disruptions. Notably, over one in five new cars sold in the European Union last month was fully electric, with sales of zero-emission models more than doubling, according to the European Automobile Manufacturers Association.
Oil Prices Retreat Despite U.S. Inventory Drawdown
Oil prices experienced a retreat from their 10-month highs, despite forecasts of a significant drawdown in U.S. crude inventories preceding the Federal Reserve’s interest rate decision.
Data from the American Petroleum Institute, released on Tuesday, indicated a drop of over 5 million barrels in U.S. crude inventories last week. Official data is scheduled for release later today. Nevertheless, traders are opting to secure profits ahead of the pivotal Fed decision, given concerns of a substantial supply deficit this year that had propelled prices to their highest levels since November of the previous year.
As of 03:40 ET, U.S. crude futures traded 1% lower at $89.56 per barrel, while the Brent contract saw a 1% decline to $93.38.
Additionally, gold futures fell by 0.2% to $1,950.05 per ounce, while the EUR/USD exchange rate showed a modest 0.1% increase, trading at 1.0690.
