It remains all about the Fed as it continues down an aggressive tightening path. Wall Street will now fixate on how quick this economy is going to weaken. A weakening consumer will help drive down inflation but so far this economy has shown a lot of resilience in the service sector.
Investors will have a handful of key economic releases to follow this week. On Monday, the ISM manufacturing report is expected to soften but still remain in expansion territory while prices paid, new orders, and employment could show modest weakness. Factory orders are also expected to turn positive in August.
The key economic release for the week is the September nonfarm payroll report, which should show hiring continued with 250,000 jobs created. Unemployment is expected to remain steady at 3.7%, while wages continue to steadily increase at 0.3% over the prior month.
It will be another week filled with Fed speak; this time with 13 appearances. On Monday, we will hear from Bostic and Williams. Tuesday’s comments come from Logan, Williams, Mester, Jefferson, and Daly. On Wednesday, Bostic speaks on inflation. Thursday’s appearance will include Evans, Cook, Waller, and Mester. On Friday Williams speaks in New York.
The minutes from the last ECB monetary policy meeting will no doubt be of interest but in reality, it all feels quite outdated. A 75-basis point rate hike is priced in for the next meeting, maybe even 100bps, and I’m not sure what in the minutes could change that.
There’s a lot of economic data being released, and they may not make for great reading, particularly on the PMI front as companies head into a nervy winter period.
It’s barely worth looking at the economic calendar next week as the direction of the pound is unlikely to be driven by the final PMI readings or Halifax PMI.
The spotlight will be on the government and Bank of England and the prospect of U-turns and more interventions. Commentary from Prime Minister Liz Truss, Chancellor Kwasi Kwarteng and BoE policymakers will obviously be of interest but ultimately, it’s what they do more so than what they say that people are interested in. In the absence of action, will pressure mount on Truss and Kwarteng from within?
While the focus next week obviously centers around events in Ukraine and the response of the West to the “referendum results”, there is some economic data that will be of interest including inflation data and PMIs.
A quiet week with the whole economy PMI on Wednesday the only notable release.
The CPI data on Monday will tell us everything and the CBRT nothing about the shambolic monetary policy experiment taking place in Turkey. Inflation is expected to hit almost 85% in September but with President Erdogan calling for more rate cuts, we all know what’s coming next.
The SNB wants everyone to know that further rate hikes are coming, perhaps even before the next scheduled meeting, and the inflation data on Monday may tell us how seriously we should take those threats. PMI and unemployment data wrap up the week on the data front.
Golden week holidays are here, and Mainland Chinese markets are closed through October 7th, while Hong Kong is only closed on Tuesday. After some verbal warnings about potentially selling dollars, traders will pay close attention to how the yuan trades. The PBOC could provide more signals about selling dollars.
The focus may be on the RBI and if they have pressure to tap their forex reserves. Economic data releases include both the manufacturing and services PMI releases.
Both the RBA and RBNZ are expected to continue with their tightening cycles.
The RBA is expected to deliver a fifth consecutive half-point hike despite signaling it could opt for a slower pace. With the rest of the world continuing to tighten aggressively, the central bank may want to avoid a downshift from its current pace.
The RBNZ is also expected to deliver a fifth straight half-point rate hike as inflation risks remain elevated. The peak in the tightening cycle is nearing thanks to lower energy prices and an improvement in supply chains.
It will be a busy week with lots of Japanese economic data. Key releases include the Tankan manufacturing report, PMI surveys, household spending data, and the leading index. Traders will pay close attention if the Japanese yen returns back to levels seen before the intervention. Currency intervention remains the most powerful that Japan has left to avoid massive selling pressure on the yen given the BoJ’s reluctance to tweak its yield curve control.
Second-tier releases include the purchasing managers’ index, retail sales, and foreign reserve data. The Singapore dollar has been weakening but is still far from the lows seen earlier in the pandemic.
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