Market Volatility Expected as UK Inflation, US Interest Rates and BoJ Decisions Loom

The coming week is expected to be one of the most consequential in recent history for markets and investors. On Wednesday, the UK will release its latest inflation figures, with analysts predicting a rise in headline inflation from 2.9% to 3% year-on-year. This could potentially bring forward expectations of a rate hike from the Bank of England, currently priced in at 4% by November.

Meanwhile, the US Federal Reserve is also set to make an announcement on interest rates on Wednesday evening UK time. Markets do not expect a rate rise this week, but recent inflation data has increased the likelihood of a hike in October. However, with the October meeting falling just days before the US midterm elections, December appears more likely for any potential increase.

The Bank of Japan is also expected to raise interest rates, with markets pricing in a 75% chance of a rate rise this week. A break below ¥110 in the AUD/JPY exchange rate could push it towards ¥107.50, while a dovish commentary from the BoJ could see the pair recover towards ¥114.