Weekly Digest: ECB Rate Hike, Turning Point for Global Energy


4 minutes read

Oct 28, 2022

EU flag on a blue sky background photographed as ECB raised interest rates to fight rising inflation

29/10/22: The ECB raises interest rates again to combat inflation, the IEA warns of a “truly global” energy crisis, Putin fuels fears of escalation by making an unsupported “dirty bomb” claim. And more.

💡Quote of the Week

“We are in the middle of the first truly global energy crisis. Our world has never ever witnessed an energy crisis with this depth and complexity.” Head of the IEA, Fatih Birol.

Investment news

🇪🇺 ECB rate hike. In the face of a likely recession, the European Central Bank doubled its key interest rate to the highest level in more than a decade. (Bloomberg)

“Inflation remains far too high and will stay above the target for an extended period. The Governing Council took today’s decision, and expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target,” the ECB said in a statement.

A pamp suisse gold bar with a fluctuating arrow going up on a yellow background

Gold up. Gold prices rose on Thursday as Treasury yields and the U.S. dollar fell amid expectations that the Federal Reserve will slow its monetary policy tightening later in the year.

After its policy meeting on November 1-2, the Fed is widely expected to increase interest rates by 75 basis points for a fourth straight time.

💡Check out our gold price page to track live gold prices, or take a look at our precious metals guide to learn how the price of gold works.

💵 Weak dollar. U.S. dollar weakness could “extend a little further” in the near term, says Barclays, stressing the importance of Fed policy moves. (CNBC)

“In the near term, you can probably see this dollar weakness extend a little further, especially when a lot of drivers have been more durable in nature,” Barclays' Ashish Agrawal said, adding that it’s too “early to call an end to the broad dollar move” as the Fed is likely to continue hiking interest rates “much further.”

A gas stove, a meter, and euro notes representing the energy crisis currently plaguing Europe

⚠️Soaring energy prices are plaguing global markets. The IEA has warned that developing nations are the No. 1 victim of the energy crisis and that the oil market will remain volatile as long as Russia's war in Ukraine continues. (CNBC)

“We are in the middle of the first truly global energy crisis. Our world has never ever witnessed an energy crisis with this depth and complexity,” said the head of the IEA, Fatih Birol.

🛢️ Oil prices under pressure. A weaker dollar and lingering fears over weak Chinese demand weighed on oil prices on Thursday, as they reversed a more-than-3% rally in the previous session. (Reuters)

When the dollar weakens, oil becomes cheaper for holders of other currencies and tends to reflect a greater investor appetite for risky assets.

Earlier this year, crude oil surged after Russia invaded Ukraine, with Brent coming close to an all-time high of $147 in March.

economic indicators with the German flag in the background

🇩🇪 German bonds in trouble. Despite being Europe's most reliable debtor, Germany is having trouble selling its bonds, just as it seeks to raise billions to solve the energy crisis, largely caused by supply shortages and Russia’s invasion of Ukraine. (Reuters)

Recent weak auctions have highlighted the challenges of issuing debt in markets racked with uncertainty about interest rates and state spending and made it harder for Germany to fund its 200 billion euro energy cost-cutting plan.

📸 Image of the week

A meme about the Fed’s uncontrolled printing of US dollars harming the economy.


🤔 You shouldn't rely on Sunak to keep your U.K. pension safe. “Liz Truss lasted only 44 days as U.K. prime minister. But her legacy in respect of your pension will almost certainly endure for decades.” (Bloomberg Opinion)

“Younger workers are very likely to face a greater period of time in between stopping work, possibly through ill-health or redundancy, and being able to claim their benefits. They’ll need to fill this funding gap themselves — and they shouldn’t count on Sunak to offer much help,” Bloomberg’s Stuart Trow writes.

What else is happening

🇬🇧 U.K.'s Sunak inherits a country in crisis. Rishi Sunak replaced Liz Truss as the U.K. prime minister following her resignation last week after just 44 days in office. Sunak promised Britain a hopeful future in the face of a “profound economic challenge.” (BBC)

"The United Kingdom is a great country but there is no doubt we face a profound economic challenge. We now need stability and unity and I will make it my utmost priority to bring our party and our country together,” he said.

Russian President Vladimir Putin photographed after saying Ukraine was allegedly working on a “dirty bomb”.

🇷🇺 “Dirty bomb.” According to Russian President Vladimir Putin, his government is "aware" of Ukraine's plans to use a "dirty bomb," a claim several Kremlin officials have made without providing any evidence. (Euronews)

Russia's deputy UN ambassador Dmitry Polyansky was asked what evidence Russia has that Ukraine is developing a "dirty bomb".

He replied: "It is intelligence information … Those who wanted to understand that the threat is serious had all the possibilities to understand that. Those who want to reject it as Russian propaganda will do it anyway."

🐦 “The bird is freed.” Elon Musk is the new owner of Twitter. After months of legal wrangling, he has closed the $44 billion deal and fired top executives, including the company's CEO Parag Agrawal. (The Washington Post)

Musk changed his Twitter bio to "Chief Twit" just before he walked into Twitter's San Francisco HQ with a porcelain sink. "Let that sink in," he tweeted.

And finally…

a picture of a dar sky full of stars representing NASA mission to study UFOs

👽 NASA’s UFO hunting. Bringing together experts from physics to astrobiology, NASA organized the first-ever panel to study what it calls "unidentified aerial phenomena,” commonly termed UFOS. (Reuters)

As NASA reports, the 16-member panel will focus exclusively on unclassified sightings and other data gathered from civilian government or commercial sectors.


See you next week!


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