G20 Fails to Reach Consensus as Market Focuses on ECB Hike and US CPI

The G20 and Shanghai Cooperation Council summits have come to an end, with the American agenda focused on convincing countries to take a harder stance against Chinese exports. However, the G20 failed to agree on a statement, with media accounts blaming China for the impasse.

Despite this, the Shanghai Cooperation Council released a statement expressing solidarity with Iran, which could be seen as a challenge to Washington's 'Operation Economic Outcast'. The price of oil has risen, with October WTI increasing by 9.2% last week and settling above $90 a barrel. However, benchmark 10-year bond yields have stabilized.

Next week will see the reaction to the German state election in Saxony-Anhalt, which could potentially give the populist AfD party its first majority. The European Central Bank is also set to meet, with expectations that it will deliver another rate hike and keep the door open for additional tightening. The US will report August CPI data at the end of the week.

The dollar index has pulled back from its initial gains after the strong jobs numbers, but the market is still pricing in a chance of a Fed hike on September 16. The correlation between the changes in the US Dollar Index and the 2-year note yield has decreased to around 0.52.