Week Ahead (21 November)

Tuesday, 22 November – Ireland’s CSO to release detailed trade statistics for September, with Great Britain continuing to play a central role in the Irish economy

On Tuesday, Ireland’s Central Statistics Office will release detailed trade statistics for the first nine months of 2022. Preliminary figures released last week show little evidence of slowdown in trade, with exports of €37 billion by end September – up 30% from 2021. Imports also rose 42% to €30.8 billion.

For the month of September, the value of goods exports rose to €19.6 billion, €4.8 billion up on September 2021. Medical and pharma products rose by €1.1bn compared with September 2021 and exports of organic chemicals rose by €2.5bn. Imports from Great Britain also increased by €2 billion (41%) when compared with September 2021 – with mineral fuels accounting for the bulk of this increase. GB accounted for 15% of total imports.

Wednesday, 23 November - UK Supreme Court to rule next week on Indyref2

On Wednesday, the UK Supreme Court will rule on whether the Scottish Parliament has the right to set up a second independence referendum without Westminster’s approval.

The First Minister of Scotland Nicole Sturgeon wants a second referendum on 19 October next year, provided that her government secures legal approval to stage it. However, Prime Minister Rishi Sunak has ruled out another referendum and insisted on the need for both governments to work together, in their bilateral meeting earlier this month.

The Scottish government claims that a referendum would fall within devolved powers. On the other hand, the UK government’s legal representative argued that the proposed Bill on an independence referendum directly relates to a matter reserved for Westminster, meaning that the UK government will have to give its consent, a highly unlikely scenario.

The Court could either let the Scottish government pass a referendum bill or block them from doing so. However, there is a third possible outcome: refusing to make a ruling. Regardless of the outcome, a political settlement would need to be reached, with public debate expected to intensify in the coming months.

Although the Scottish people voted against independence in 2014, the Scottish government has argued that a new referendum should take place, mainly due to Brexit. Recent polling suggests 50% of Scots are favoring independence with 43% against, and the remaining 7% either undecided or unwilling to answer.

Thursday, 24 November - Extraordinary Energy Council to take place; EU ministers to discuss potential gas price cap

Energy ministers will meet on Thursday to discuss additional measures to contain energy prices for households and businesses, including a highly-contentious EU-wide cap on natural gas prices.

Last month, EU leaders agreed at the European Council to work on measures to contain energy prices for households and businesses, following the Commission’s previous energy emergency package. These proposals, including a default solidarity mechanism in case of supply shortages, and a mechanism for voluntary joint gas purchases, are widely backed by member states, and their legal specificities will be negotiated in the coming months, including in the upcoming extraordinary Energy Council.

Despite reaching a consensus on the above measures, EU capitals remain split over the potential capping of gas prices on EU markets, which is backed by 15 member states

Following repeated calls by member states and the President of the European Council Charles Michel, the Commission once again presented a non-paper on what the price cap would entail, instead of a formal legislative proposal ahead of the Energy Council. The non-paper outlined plans for a gas price ‘’correction mechanism’’, suggesting the introduction of a fixed price ceiling with a price cap immediately activated should the monthly price exceeds a designated rate at the Dutch TTF hub.

The Commission remains reluctant on gas price caps, sharing Germany’s concerns over potential implications for the security of supply and the risk of redirecting LNG supplies to the Asian market.

Belgium, Greece, Italy, and Poland appear to be particularly supportive of the ‘’dynamic price ceiling’’ plan, although deciding on a price threshold could spark another debate. The Commission will take stock of the member states’ key arguments in the upcoming Energy Council meeting, before presenting a legislative proposal on gas price caps.

Thursday, 24 November - ECB to release minutes of October meeting

The European Central Bank will release the minutes of its October meeting on Thursday, which will indicate the level of support for the governing council’s decision to increase interest rates by 75 basis points. In the last three months, the ECB has increased interest rates by a total of 200 basis points to 1.5%. Investors are pricing in a rate hike of 50 or 75-basis-point at the upcoming ECB governing council in December.

Since the October meeting, several members of the governing council have indicated that the ECB is likely to stick to its more hawkish stance in the coming months. Last Friday, ECB’s President Christin Lagarde reiterated her commitment to bringing inflation down to the 2% target, stating that the Bank will ‘’take all necessary steps’’, after having previously acknowledged that inflation will be high for longer than originally expected. The Dutch central bank chief, Klaas Knot, also indicated that the ECB has ‘’long way to go’’ with rate hikes. The governor of the French Central Bank, Francois Villeroy de Galhau, also stated that the ECB should not stop raising rates as long as underlying inflation has yet to peak, even beyond the ‘’normalisation range’’ of 2%.

Furthermore, the governor of the French Central Bank, Francois Villeroy de Galhau, stated that as long as underlying inflation has not clearly peaked, the ECB should not stop raising rates, warning that it could take two to three years to bring inflation back to the ECB’s target. He also admitted that interest rates were approaching the ‘’normalisation range’’, estimated at around 2%, adding that beyond this level, the ECB will probably continue to raise rates but ‘’in a more flexible and possibly less rapid manner’’.

Overall, markets expect ECB’s interest rates to peak at around 3% during the first half of 2023.