MARKET ANALYSIS

Events to Look Out For Next Week

Analysis Team

September 15, 2023

Next week will be one marked by multiple decisions by the world’s major Central Banks, the Fed in the first place. PMI data will then give colour to the expected strength of the economy in the coming months, while we will continue to keep our eyes firmly on prices, after the impromptu rise we saw in the US, for example.

Tuesday – 19 September 2023

Harmonized / Core Harmonized Index of Consumer Prices (EUR, GMT 09:00) – The ECB has just raised rates despite sluggish growth in the area to combat still sustained price growth: in July these indicators were both showing +5.3% year-on-year, a level that is still too high. The August figures are expected to stay in line at the same level of growth, +5.3%.
Canadian CPI (CAD, GMT 12.30) – Inflation in Canada is at similar levels to the US, even lower: 3.2% and 3.3% in July on the headline and core components respectively. But the former has risen again in the latest report, and consistently from +2.8% in June: will it follow in its neighbour’s footsteps and mark a second consecutive rise? Expectations are for a +3.8% rise in the headline component.

Wednesday – 20 September 2023

PBoC Interest Rate Decision (CNH, GMT 01:15) – China’s central bank has been very active this year in trying to stimulate the economy with various instruments and has already tweaked various interest rates and margins requirements from banks several times: in August the key one-year loan prime rate was lowered from 3.55% to 3.45% where it now stands. It remains to be seen whether the bank will take a break after the latest vaguely positive data.
UK CPI, PPI, Retail Price Index (GBP, GMT 06:00) –Prices in the UK continue to grow at the highest levels among advanced economies: in July y/y CPI was +6.8%, Core CPI +6.9%, Retail Prices +9%. The economy seems to be languishing in stagflation but this is not what policy makers would like to see, as they expect to see numbers close to 5% by the end of the year. Expectations are for a rise of the headline component to +7.1% and a slowdown in the core one, to +6.8%, while RPI is forecasted at +9.3% y/y.
FED Interest Rated Decision and FOMC Press Conference (USD, from GMT 10:00) -Little drama is expected out of next week’s FOMC. The official rate is in the 5.25% – 5.50% range and the market continues to price in very little risk for a hike next week. Chances for a 25 bp rate hike in November are still on the cards amid sticky core inflation and a still tight labor market. Very important will be subsequent comments from the ever-balanced Jerome Powell, who will perhaps explain the bank’s view on prices that have been rising again over the past two months while growth and jobs seem to be holding strong.

Thursday – 21 September 2023

SNB Interest Rated Decision and Monetary Policy Assessment (CHF, GMT 07:30) –Earlier this month, economists at Credit Suisse/UBS were saying the SNB could raise the current 1.75% level even in the event that the neighboring ECB paused, citing the usual price fight but also the interest rate differential with the eurozone. Instead, Madame Lagarde raised and even though Inflation is actually below 2%, the Swiss bank’s projections suggest caution and that a 25 bps hike could be in the cards.
BOE Interest Rate Decision, Minutes and Monetary Policy Summary (GBP, GMT 11:00) –SONIA futures data seem to take it for granted that the BOE will raise at this meeting from the current 5.25% to 5.50%: but most important will be to understand the internal divisions and alternatives on the bench for the bank that is perhaps facing the most difficult situation, with a stagnant economy and prices running hot. Economists polled by Reuters think 2 members will vote for keeping the rate unchanged, up from just 1 at the last meeting.
US Jobless Claims and Existing Home Sales (USD, GMT 12:30, 14:00) –The US labor market has shown that it is still very tight despite some slowdown that was most noticeable in the ADP data and the pickup in the unemployment rate (+3.8% in August from +3.5%), actually due to a rise in the Labor Force Participation Rate. This week, it is expected that Initial Claims will rise by just 5k to +225k. While mortgage demand has sunk to a 28-year low given the high rates, existing home sales are also suffering (+4070k in July down from +4160k in June) in contrast to new home sales, which continue to climb (+714k). Two more data points to see how strong the US locomotive is. Expectations are for 4100k Existing Home Sales.

Friday – 22 September 2023

BOJ Interest Rate Decision and Monetary Policy Statement (JPY , GMT early morning time, not disclosed) –Yen weakness, a still negative official rate (-0.1%), recent changes to the YCC on the 10-year, Ueda statements, prices and wages that finally seem to be rising consistently toward the bank’s target bring into question whether or not the process of monetary policy normalization from an ultra loose stance has really begun. With the USDJPY in the 148 area, an event definitely not to be missed. No changes are expected for the Official Interest Rate.
French, German, European HCOB PMIs, UK S&P/CIPS PMIs (EUR, GBP, starting GMT 07:15) – The dire state of manufacturing had long been evident in the data for this leading indicator in both Europe and the UK, but it was the fall of the services component into the contraction zone last month that shook the markets and provoked sudden sell-offs at the release of the EUR and GBP data: so it will be closely watched this time as well, as it may indicate a more widespread slowdown in the economies on this side of the pond. Expectations are mixed, with a small rebound in the EU manufacturing component (44 up from 43.5), a further drop in German and English Service component (47.1 down from 47.3 and 49 down from 49.5 respectively)

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Marco Turatti

Market Analyst

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