Below are the most important global events likely to impact currency and bond markets over the next week starting October 7th.
While the market remains uncertain about the scale of future interest rate cuts, the US inflation statistics for September and the minutes of the September meeting of the US Federal Reserve (Fed), which opted for a large rate cut, are likely to attract attention.
In the euro area, France’s 2025 budget announcement and European Central Bank minutes will be closely watched, while interest rate decisions are scheduled in New Zealand, South Korea and India.
Investors will continue to closely monitor recent events in the Middle East that have affected markets and, at times, triggered a move towards safe-haven assets.
us
Wednesday’s Federal Reserve meeting minutes, where the central bank opted to begin a deep 50 basis point interest rate cut, and Thursday’s U.S. consumer price inflation data for September will help investors decide The scale of future interest rate cuts will be closely watched.
The Fed is expected to cut rates again at its November and December meetings, but likely at a slower and more normal pace of 25 basis points. However, U.S. money markets have priced in a total rate cut of about 67 basis points over those two meetings, according to data from LSEG Refinitiv, and further cuts remain a possibility.
Fed Chairman Jerome Powell said in a recent speech that central bank policymakers are likely to continue lowering rates, but that they see no reason to do so as aggressively as they did in the most recent meeting.
“If the economy continues as expected, we will see two more quarter-point rate cuts this year,” Powell said during the moderated debate.
ING analyst Francesco Pesole said in a note that Powell’s comments provided “unusually concrete guidance.”
Analysts at HSBC said in their minutes that many policymakers favored a more modest 25 basis points (bp) cut, rather than the steeper 50 basis points (bp) that the majority had chosen. He said that there is a possibility that it will become clear.
“The minutes of the September meeting should shed further light on the FOMC’s deliberations and the potential two-sided risks to the economy and monetary policy.”
Following the minutes, Thursday’s U.S. inflation data should be another key indicator on the outlook for interest rates, but it will likely take a particularly weak number for expectations of another big rate cut to begin to build.
“U.S. inflation is likely to decline further significantly towards the 2% level in September. Core interest rates are also expected to fall again, but could remain above 3%,” LBBW analysts said in a note. “It’s very sexual,” he said.
Another key piece of data will be the University of Michigan’s October Preliminary Consumer Survey released on Friday, which will give an indication of the current state of the U.S. economy.
Other statistics to be released this week include August trade data on Tuesday, weekly new jobless claims on Thursday and September producer prices on Friday.
The Treasury will sell new three-year bonds on Tuesday, resume 10-year bonds on Wednesday, and then sell 30-year bonds on Thursday.
Canada
Canada’s monthly employment statistics for September will be released on Friday. Some say the Bank of Canada may choose to cut rates by an even larger 50 basis points at its next meeting later this month, given the weak economy and the Federal Reserve’s decision last month to begin cutting rates sharply. This trend will attract attention amid speculation. Half price point refund.
Economist David Rosenberg, who heads Rosenberg Research, said the combination of early and deep Fed interest rate cuts, a surprisingly resilient Canadian dollar and evidence of “tremendous slack” in Canada’s labor market , said that’s enough reason for the Bank of Canada to pursue further interest rate cuts. .
Canadian trade statistics for August will also be released on Tuesday.
latin america
Inflation data for September is due to be released by Mexico and Brazil on Wednesday, and by Argentina on Thursday. Colombia and Chile will also release inflation statistics on Tuesday.
eurozone
The French government is scheduled to present its 2025 budget on Thursday amid concerns about the country’s high budget deficit and the possibility of serious disagreements between the main parties in the government.
“The public deficit target is likely to be set at 5% of GDP, up from an expected budget deficit of over 6% in 2024,” economists at HSBC said in a report, adding that public spending would be It said it would be achieved through a combination of cuts and tax increases.
The European Central Bank will publish the minutes of its September meeting on Thursday, but will be closely watched for any possible rise in expectations that the central bank is likely to opt for successive interest rate cuts at its next meeting. It will be. October 17th.
Eurozone money markets are now fully pricing in further interest rate cuts this month, following data showing a significant decline in eurozone inflation last month. ECB President Lagarde also recently said in a statement to the European Parliament that the central bank is now more confident that inflation will return to its 2% target and will take this into account at its October meeting.
“It is now difficult to justify any policy other than an October rate cut,” Jussi Hiljanen, chief euro/dollar rates strategist at SEB Research, said in a note.
Investors will focus on German manufacturing orders and industrial production data for August on Monday and Tuesday, respectively, with recent data showing weakness in the German economy, particularly in the key manufacturing sector.
Germany’s final inflation figures for September will be released on Friday.
Germany will issue green bonds on Tuesday and 15-year bonds on Wednesday. Other issuers include Austria and the Netherlands on Tuesday and Italy on Friday.
England
In a quiet week for British economic indicators, all eyes will be on Friday’s August UK gross domestic product (GDP), which will also be announced as well as August’s industrial production.
“The signs for August are not bad (even if sentiment took a bit of a hit in September). There was a rate cut on the first day of the month, and the housing market and Purchasing Managers Index were more buoyant.” Statistics for the month are positive ,” HSBC economists said in a note. The monthly GDP growth rate for August is expected to be 0.2%.
Future indicators on the UK economy will now be closely monitored, as questions remain about the speed at which the Bank of England is likely to cut interest rates after recent contradictory comments.
Following comments from BOE Governor Andrew Bailey that the BOE may cut interest rates more aggressively if inflation continues to decline, there is speculation that the BOE may choose to cut interest rates in succession in November and December. As the market spreads, yields on the pound and British government bonds have fallen.
But Hugh Pill, the BOE’s chief economist, warned in a later speech that the risk of cutting rates was “either too much or too fast,” suggesting a more gradual pace of quarterly rate cuts was likely. .
“Markets probably took Mr. Bailey’s words too literally and took them more as confirmation of an acceleration in rate cuts than just a warning that this was a possibility,” said Matthew Ryan, a strategist at Everly. said.
The RICS House Price Survey for September will also be released on Thursday.
The Debt Management Bureau will auction off index-linked government bonds dated 2039 on Tuesday and government bonds dated 2034 on Wednesday.
scandinavia
Norway’s inflation statistics for September will be released on Thursday.
This figure is unlikely to change expectations that Norwegian interest rates will remain unchanged for some time. Norges Bank said at a meeting last month that restraint monetary policy is still needed to bring inflation down to target, and the central bank believes that if interest rates are cut prematurely, inflation will remain above target for too long. He said he was concerned about the possibility.
Norway and Sweden will hold bond auctions on Wednesday.
Switzerland
A bond auction is scheduled for Wednesday in Switzerland.
australia and new zealand
The Reserve Bank of New Zealand is expected to cut the official cash rate by 50 basis points to 4.75% on Wednesday, accelerating the pace of easing. The central bank is expected to hint that similar cuts could be made in November.
Now that the RBNZ has begun easing, economists expect a big rate cut towards the end of the year, with the economy still reeling from years of recession.
Most economists say the outlook for 2025 is for continued rate cuts as inflation returns to target.
In Australia, minutes from the Reserve Bank of Australia’s recent policy meeting are due to be released on Tuesday, with bond traders asking why the policy-making board did not “explicitly” discuss the possibility of rate hikes at the meeting. We look forward to further clarification on this matter.
RBA Governor Michelle Bullock confirmed in a recent press conference that rate hikes were not being discussed, but it remains to be seen whether this means the central bank has not taken a more hawkish policy stance. It’s unknown.
Block continues to stress that there is considerable uncertainty about the outlook and that no policy action has been ruled out.
Three senior central bank officials are also expected to make public appearances this week, with a speech by central bank deputy governor Andrew Hauser on Tuesday expected to be a highlight.
South Korea
South Korea’s central bank may consider finally ending its long streak of keeping policy interest rates at 15-year highs at its board meeting on Friday.
The Bank of Korea is reluctant to rush to lower borrowing costs due to concerns about the country’s rising household debt and the rapid increase in housing loans.
But with headline inflation easing faster than expected in September and house prices showing signs of easing, markets believe a policy shift is on the cards. Private consumption and investment remain sluggish, increasing the need for interest rate cuts.
(Read more) Dow Jones Newswires
10-04-24 1051ET
