Week Ahead: US, Eurozone Inflation, Powell Speech, BoJ Minutes to Drive Markets

US

It will be a busy week filled with a wide range of economic releases, with the focus falling on the consumer and the Fed’s preferred inflation gauge. August personal income is expected to rise given the strong labor market while spending cooled given the end of summer vacations. The bond market will pay extremely close attention to the next round of inflation readings. Headline PCE will likely heat up given the surge in energy prices, while the core reading should maintain the 0.2% monthly pace.

Wall Street will also pay close attention to the UAW strike and if the government shutdown odds grow. It will also be a busy week filled with central bank speak. On Monday, the Fed’s Kashkari speaks at Wharton School. Tuesday contains Bowman’s welcoming remarks at a Fed Communities event on rental housing affordability. Thursday contains four events, with Chair Powell hosting a town hall with educators and speeches from Goolsbee, Cook, and Barkin. Williams speaks on monetary policy on Friday.

Eurozone

The ECB signaled after its September meeting that its tightening cycle was likely at an end, barring any nasty surprises on the data front. Next week could be the first test of that, with flash HICP inflation data due on Friday. Substantial progress has already been made and much more is expected over the remainder of the year, while a cooling economy and threat of recession are clearly making policymakers nervous.

As always, a number of individual countries will release their inflation numbers in the days leading up to the eurozone release so we could have a pretty good idea of what we’re in for by the time the Friday release happens. That aside, there are some surveys released over the course of the week among other tier two and three data. Central bank speak will also be monitored, most notably President Christine Lagarde’s comments as she makes an appearance on the same day as the inflation report is released.

UK

The Bank of England surprised markets this past week in choosing to hold the Bank Rate at 5.25, with those backing it taking the vote by the finest of margins 5-4. That doesn’t necessarily mark the end of the tightening cycle but if the data improves as the MPC expects, it may well be. Any negative data surprises between now and the early November meeting though may tip the balance the other way. There’s going to be even more pressure on the data now, not that there’s really anything of note next week. The final GDP reading for the second quarter is the only one that stands out in any way.

Russia

There’s a selection of data due next week although I’m not sure any will hold much sway when it comes to upcoming monetary policy announcements unless they’re particularly shocking. Industrial output, retail sales, GDP, unemployment, and real wages are among the releases. Russia’s issues with inflation and the currency are much bigger than all of these, although it will be interesting to see how the economy is holding up amid these additional pressures.

South Africa

The SARB held rates steady at its September meeting, as expected, with headline and core inflation sitting comfortably within its 3-6% target. The central bank continued to warn about risks to the inflation outlook and hasn’t declared the end of the tightening cycle just yet. PPI figures next week may be of interest.

Turkey

The Turkish central bank raised interest rates by 5% on Thursday, taking the Key Rate to 30% amid a plunging lira and soaring inflation. The move didn’t help lift the currency which still sits near record lows. Next week doesn’t have much to offer beyond a few tier-three data releases.

Switzerland

The SNB opted against raising interest rates in September as their new forecasts showed inflation below 2% over the forecast horizon, meaning no more tightening is necessary. The decision obviously came with warnings that hikes could be considered in the future if the data warrants it, as the SNB attempted to put itself into hawkish hold territory, which markets didn’t buy. The SNB is done with rate hikes and the focus now will shift to when the first cut will come. Next week has a few things of note, with the KOF indicator and investor sentiment surveys, and the SNB quarterly bulletin being released.

China

The only data to watch will be total industrial profits for August which are forecasted to contract at a slower pace of -10% y/y from -15.5% y/y in July.

India

Q2 current account and external debt data will be released on Friday. The current account deficit is expected to shrink marginally to $1 billion from $-1.3 billion recorded in Q1.

The Indian rupee has been resilient against the strength of the US dollar against other emerging currencies in the past three months. The USD/INR has been trading in a tight range of 175 pips and capped below its October 2022 high of 83.28.

Australia

Two key data releases to be aware of this week. Firstly, the monthly CPI for August will be out on Wednesday, and after a deceleration to 4.9% in the year to July, marking the lowest inflation rate since February 2022, a slight uptick to 5.2% is expected in August.

Secondly, preliminary retail sales for August on Thursday are expected to show a dip to 0.3% m/m from 0.5% in July.

New Zealand

Business confidence data for September is due on Thursday with an improvement to 5 from -3.7 in August expected. That would put an end to 26 consecutive months of negative readings.

Consumer confidence on Friday is expected to slow to 81.5 for September from 85 previously.

Japan

Bank of Japan (BoJ) monetary policy meeting minutes will be out on Wednesday and market participants will scrutinize the BoJ official’s remarks or expressed views on the state of inflation in Japan as well as any debate on bringing forward the end of negative interest rate policy.

A busy Friday with a slew of data releases. The leading Tokyo core inflation reading (excluding fresh food) is expected to dip to 2.6% y/y from 2.8%. That would be the third straight month of deceleration in Tokyo’s core inflation. However, the core-core inflation rate (excluding fresh food and energy) is forecasted to remain the same at 2.6% y/y for September, a 31-year high.

Retail sales for August are expected to dip slightly to 6.6% y/y from 6.8% in July, Consumer confidence in September is expected to improve to 37 from 36.2 in August.

Singapore

Inflation data for August will be out on Monday and the core inflation rate is expected to decelerate further to 3.5% y/y from 3.8% in July. That would be the fourth consecutive month of slowdown. Meanwhile, the headline inflation rate is expected to be almost unchanged at 4% y/y in August versus 4.1% in July.

August’s industrial production figures will be released on Tuesday with another month of contraction expected at a higher magnitude of -3.1% y/y from -0.9% in July. That would mark eleven straight months of contraction suggesting a sticky weak external demand environment.

See this week's economic calendar

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