Market Outlook for the Week of 23rd – 27th September

Monday is a bank holiday in Japan in observance of Autumnal Equinox Day. Later in the day we’ll see the release of flash manufacturing and services PMI data for the eurozone, the U.K. and the U.S.

On Tuesday, the focus will shift to the Reserve Bank of Australia’s monetary policy announcement. In the U.S., key data releases include the CB consumer confidence index and the Richmond manufacturing index.

Wednesday will bring important inflation data from Australia, along with Japan’s release of the BoJ core CPI y/y figure. In the U.S., new home sales data will also be published.

Thursday’s attention will be on the Swiss National Bank’s monetary policy announcement. The U.S. will release its final q/q GDP figures, along with unemployment claims and durable goods orders m/m.

On Friday, Japan will report the Tokyo core CPI y/y, Canada will release its m/m GDP data, and the U.S. will publish the core PCE price index m/m, alongside revised UoM consumer sentiment and inflation expectations figures.

Throughout the week, multiple FOMC members are scheduled to deliver their remarks and Fed chair Powell will release a pre-recorded statement.

The consensus in the U.S. is for the flash manufacturing PMI to rise from 47.9 to 48.6, while the flash services PMI is expected to drop from 55.7 to 55.3.

The manufacturing sector continues to face pressure due to high borrowing costs, and recently, weather disruptions have contributed to the weakness, so the overall outlook remains unpromising. The services sector has managed to stay in expansionary territory, but no significant improvement is expected in this week’s data.

At this week’s meeting, the RBA is expected to keep its monetary policy unchanged. At the previous meeting, it emphasized that inflation remains a concern in Australia, which is why the Bank has been slower to consider rate cuts.

The main policy interest rate is expected to remain at 4.35% until the end of the year. With resilient economic conditions and high inflation, it is unlikely that the Bank will begin cutting rates before the year ends. The CPI data for Australia will be released after the meeting, with the consensus expecting a y/y CPI of 2.7%, down from the previous 3.5%.

This week’s SNB meeting is the last one with Thomas Jordan as Governor. A 25 bps rate cut is expected at the meeting, though a 50 bps decrease is not completely ruled out. Recently, inflation in Switzerland dropped more than anticipated, and the government is forecasting inflation rates of 1.2% for 2024 and 0.7% for 2025.

The Swiss franc has also strengthened lately, a development that Jordan made clear he did not welcome, as it puts pressure on exporting companies. These factors could support the case for a 50 bps rate cut, but it remains to be seen whether this will happen.

In the U.S., the consensus for core durable goods orders m/m is 0.1%, compared to the previous -0.2%, while for durable goods orders m/m, it is -2.7% versus the prior 9.8%.

The last uptick in durable goods orders was attributed to a surge in aircraft orders, which drove the increase to 9.8% in July. However, excluding aircraft, durable goods orders show some underlying weakness. The beginning of the Fed’s easing cycle is expected to have a positive impact on the manufacturing sector, but it will take time for its impact to be reflected in the demand for durable goods.

The consensus for Tokyo core CPI y/y is 2.0%, down from the previous 2.4%. Analysts from Citi suggest that the resumption of government subsidies for electricity and gas prices will likely moderate core inflation. Overall, inflation excluding fresh food and energy is expected to increase due to earlier rising costs of materials and the yen depreciation.

In the U.S. the consensus for the PCE price index m/m is 0.2% vs prior 0.2%. Personal spending has remained robust but comes at the expense of savings, with the saving rate dipping below 3.0% for the first time since 2008. Analysts from Wells Fargo point out that despite small gains in disposable personal income, the growth in spending has outpaced income for six consecutive months.

Wish you a profitable trading week.

This article was written by Gina Constantin at www.forexlive.com.