The dollar continues to receive support from positive macro statistics from the United States and against the backdrop of hawkish rhetoric by representatives of the Fed regarding the prospects for the monetary policy of the US Central Bank. Now, with a probability of almost 93%, according to the Chicago Mercantile Exchange (CME), the Fed interest rate will remain at 5.50% at the end of the September meeting (September 19-20). And with a probability of approximately 60%, market participants expect it to increase in November.
Also this week (18.09.2023 – 24.09.2023) the Central Banks of China, Switzerland, the UK, and Japan will hold their meetings on monetary policy issues.
Market participants will also pay attention to important macro statistics from Canada, the UK, US, Germany, and the Eurozone.
* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
No important macro statistics scheduled to be released.
Tuesday, September 19
01:30 AUD Minutes of the last meeting of the RB of Australia
This document is published two weeks after the meeting and the decision on the interest rate. If the RBA is positive about the state of the country’s labor market, GDP growth rates, and is also hawkish about the inflation outlook for the economy, markets view this as a higher likelihood of a rate hike at the next meeting, which is a positive factor for the AUD. The bank’s soft rhetoric regarding inflation primarily puts pressure on the AUD.
At its recent (September 2023) meeting, the RBA again paused hikes, keeping interest rates at 4.10%, but in the accompanying statement signaled the likelihood of further increases in the coming months.
“The board will do whatever is necessary to ensure that inflation in Australia returns to target over time,” said head of the the central bank Philip Lowe. “This will require further interest rate increases in the future.”
“The decision to leave rates unchanged allows additional time to assess the impact of rate hikes to date and the economic outlook,” Lowe said, while stressing that “inflation in Australia is easing but remains too high.”
The Australian dollar fell sharply after the RBA meeting, but still retains potential for growth. However, if the published minutes contain unexpected information regarding the RBA’s monetary policy issues, the volatility in AUD quotes will increase.
12:30 CAD Consumer price indices in Canada
Consumer Price Index (CPI) reflects the dynamics of retail prices of the corresponding basket of goods and services, and Core CPI does not take into account fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transport, and tobacco products. The inflation target for the Bank of Canada is in the range of 1% – 3%. An increase in the CPI indicator is a harbinger of a rate increase and a positive factor for the CAD.
- Consumer Price Index: +0.6% (+3.3% in annual terms), +0.1% (+2.8% in annual terms),
- Core Consumer Price Index (from the Bank of Canada): +0.5% (+3.2% in annual terms), -0.1% (+3.2% in annual terms).
If the expected data turn out to be worse than previous values, this will negatively affect the CAD. Data better than previous values will strengthen the Canadian dollar.
Wednesday, September 20
01:15 CNY People’s Bank of China interest rate decision
Since May 2012, the People’s Bank of China has been steadily reducing interest rates to support Chinese manufacturers. The bank last lowered the rate in June 2023 (by 0.1% to 3.55% currently).
In 2020, amid international trade conflicts and a slowing global economy, the world’s largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitiveness of goods exported from these countries.
The People’s Bank of China is also in line with this process. The depreciation of the yuan has become especially relevant in the last 4-5 years, when the confrontation between the two most powerful economies in the world began. One of the measures to mitigate the negative consequences of increased duties on the import of Chinese goods into the United States was the depreciation of the national currency of China. This measure was intended, among other things, to maintain the previous volumes of imports of Chinese products into the United States, which would be cheaper for American buyers due to the difference in the exchange rates of the national currencies of the United States and China.
An additional strong negative factor was the coronavirus pandemic.
It is likely that at this meeting the People’s Bank of China will keep the interest rate at the same level of 3.45%, although unexpected decisions are not impossible.
If the People’s Bank of China makes unexpected statements or decisions, volatility may increase throughout the financial market. Investors will also be interested in the bank’s assessment of the consequences of the coronavirus for the Chinese economy and its policy in the near future.
06:00 GBP Consumer Price Index. Core Consumer Price Index
Consumer Price Index (CPI) reflects the dynamics of retail prices for a group of goods and services included in the British consumer basket. The CPI index is a key indicator of inflation. Its publication causes active movement of the pound on the foreign exchange market, as well as of the London Stock Exchange FTSE100 index.
In the previous reporting month (July), the growth of consumer inflation slowed to -0.4% (+6.8% in annual terms). However, data suggests inflation pressures are still high, which is likely to support the pound. An indicator value below the forecast/previous value could trigger a weakening of the pound, as low inflation will force the Bank of England to maintain a loose monetary policy.
Core Consumer Price Index (Core CPI) is published by the Office for National Statistics and measures changes in the prices of a selected basket of goods and services (excluding food and energy) over a given period. It is a key indicator for assessing inflation and changes in consumer preferences. A positive result strengthens the GBP, a negative result weakens it.
In July, Core CPI increased by +6.9% (in annual terms). It is likely that the publication of the indicator will have a short-term positive impact on the pound if its value is higher than the forecast and previous values. An indicator value below the forecast and/or previous values may trigger a weakening of the pound.
18:00 USD The Fed’s interest rate decision and monetary policy statement. Summary of Economic Projections of the Federal Open Market Committee
In 2020, the dollar declined because investors withdrew funds from protective assets to buy riskier and more profitable assets on the stock market, which continued to grow despite the threat of a second wave of the coronavirus epidemic and the associated economic slowdown. The role of the dollar as a defensive asset was also declining. However, in 2021 the situation changed – the dollar strengthened. Now market participants are waiting for the US central bank to either pause or continue the cycle of tightening monetary policy, but at an even slower pace.
It is expected that at this meeting the rate will remain at the same level, but it is also possible that it will be increased by 0.25% to 5.75%.
During the publication of the rate decision, volatility may rise sharply throughout the financial market, primarily in the American stock market and in dollar quotes, especially if the rate decision differs from the forecast or unexpected statements are made by the Fed management.
Powell’s comments could impact both short- and long-term USD trading. A more hawkish stance on the Fed monetary policy is seen as positive and strengthens the US dollar, while a more cautious stance is seen as negative for the USD. Investors want to hear Powell’s thoughts on the Fed’s plans for this year.
Also traders should pay attention to the Fed’s report with forecasts for inflation and economic growth for the next two years and, no less important, the individual opinions of FOMC members on interest rates.
18:30 USD Press conference of the FOMC (Federal Open Market Committee)
The press conference of the US Federal Open Market Committee lasts about an hour. The first part reads the ruling, followed by a series of questions and answers that could increase market volatility. Any unexpected statements by Powell on the Fed’s monetary policy will cause increased volatility in dollar quotes and the American stock market.
22:45 NZD New Zealand GDP for the 2nd quarter
The release of the data will cause increased volatility in the NZD. Given the recent rise in commodity and agricultural prices (especially dairy, which is a key component of New Zealand’s exports), and the fact that New Zealand has been least affected by the coronavirus pandemic compared to other large economies, it is likely that the New Zealand GDP report for the 2nd quarter of 2023 will be released with positive indicators.
GDP is expected to contract in 2Q 2023, but rise again in annual terms (previous annual values: +2.2%, +2.2%, +6.4%, +0.4%, +1.2%, +3.1%, -0.2%, +2.9%, -0.8%, +0.2%, -11.3%, 0%, +1.7%). The data remains inconsistent, although it points to a continued gradual recovery of the New Zealand economy after its collapse in the first half of 2020. Data worse than previous values will have a negative impact on the NZD quotes.
Thursday, September 21
07:30 EUR S&P Global German Services Business Activity Index (PMI) (preliminary release)
Germany’s Services PMI is an important indicator of business conditions and the overall health of the German economy. A result above 50 is seen as positive and strengthens the EUR, while one below 50 is negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro.
- Services PMI: 47.3, 52.3, 54.1, 57.2, 56.0, 53.7, 50.9, 50.7, 49.2, 46.1, 46.5, 45 ,0, 47.7, 49.7, 52.4, 55.0, 57.6, 56.1, 55.8
07:30 CHF SNB’sdecision on interest rates. Monetary Policy Statement
Before the June 2022 SNB meeting, the current deposit rate was in negative territory and amounted to -0.75%. However, following this meeting of the central bank, the rate was raised to -0.25%.
In an accompanying statement, head of the Swiss National Bank Thomas Jordan noted that the Swiss franc is no longer grossly overvalued and that “tighter monetary policy aims to prevent inflation from becoming more widespread in Switzerland.”
Recently, the franc has largely lost its status as a safe-haven currency, and the threat of intervention certainly restrains the franc from excessive growth. According to SNB leaders, intervention in the foreign exchange market remains “an important means of maintaining the low attractiveness of investments in francs and easing upward pressure on the currency.”
It is widely expected that the deposit rate will be kept at 1.75% at the end of the September 2023 meeting.
Traders will also be carefully studying the SNB’s statement to pick up signals regarding the SNB’s future monetary policy plans. Tough rhetoric of the statement will help strengthen the franc. The soft tone and the tendency to continue the extra soft monetary policy of the SNB will negatively affect the franc. High volatility is expected in the foreign exchange market and, above all, in franc trading if the management of the National Bank of the Bank makes unexpected statements.
11:00 GBP Bank of England’s interest rate decision. Minutes of the meeting of the Bank of England Planned volume of asset purchases by the Bank of England. Monetary Policy Report
Following its December meeting, the Bank of England unexpectedly raised its key interest rate to 0.25%, becoming the first leading central bank to increase borrowing costs since the outbreak of the coronavirus pandemic. In February, the interest rate was increased to 0.50%, in March – to 0.75%, in May – to 1.00%, in December – to 3.50%, and in August 2023 – to 5.25 %. Members of the Monetary Policy Committee considered raising borrowing costs in a strong labor market to curb price increases to be appropriate. At the same time, further tightening of monetary policy may be required to bring inflation to the target level of 2.0%.
The Bank of England is expected to raise interest rates again at this meeting. However, despite the high level of inflation in the country and positive macro data from the UK, the interest rate may remain at the same level of 5.25%, given the difficult geopolitical situation in Europe, in particular in Ukraine. Such a decision could cause the pound to weaken.
Also at this time, the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the breakdown of votes for and against raising/lowering the interest rate. The main risks for the UK after Brexit are related to expectations of a slowdown in the country’s economic growth, as well as a large current account deficit in the UK’s balance of payments.
The intrigue about the Bank of England’s further actions remains. There are plenty of trading opportunities in the pound and the FTSE100 futures during the period when the bank’s decision on rates is published.
Also at the same time, the Bank of England’s monetary policy report will be published containing an assessment of the economic outlook and inflation. At this time, volatility in pound quotes may increase sharply. One of the main benchmarks for the Bank of England regarding the outlook for monetary policy in the UK, in addition to GDP, is the rate of inflation. If the tone of the report is soft, the British stock market will receive support and the pound will decline. Conversely, the report’s tough rhetoric on curbing inflation implying further interest rate hikes in the UK will lead to a stronger pound.
Friday, September 22
After 02:00 (exact time unknown): JPY Bank of Japan’s interest rate decision. Bank of Japan’s press conference and monetary policy statement
The Bank of Japan will decide on the interest rate. Currently, the main rate in Japan is in negative territory amounting to -0.1%. Most likely, the rate will remain at the same level. If it is cut and goes deeper into negative territory, such a decision will cause a sharp decline in the yen in the foreign exchange market and growth in the Japanese stock market. In any case, during this period of time a jump in volatility in yen quotes and in the Asian financial market is expected.
Since February 2016, the Bank of Japan has kept the deposit rate at -0.1%. The 10-year yield target is currently hovering around 0%. One of the recent accompanying statements from the Bank of Japan said that the bank’s management will continue to “increase the monetary base until inflation is consistently above 2%.” “We will not hesitate to take additional easing measures if necessary,” the bank’s statement also traditionally said.
During the press conference, head of the Bank of Japan Kazuo Ueda will comment on the bank’s monetary policy. The Bank of Japan continues to adhere to its ultra-loose monetary policy. As the former head of the Japanese Central Bank Haruhiko Kuroda has repeatedly stated, “it is appropriate for Japan to patiently continue the current loose monetary policy.” Markets usually react noticeably to the speeches of the head of the Bank of Japan. He is sure to touch on the topic of monetary policy during his speech, which will cause increased volatility not only in trading in the yen, but throughout the Asian and global financial markets.
If bank officials decide that Japan’s economy is stable and inflation momentum toward the 2% target is not slowing, they will refrain from changing policy.
06:00 GBP Retail sales
This economic indicator tracks the level of consumer demand and is the most important indicator influencing the market and quotes of the national currency. It is also an indirect indicator of inflation, thus being of interest both to the country’s central bank and to market participants.
The Retail Sales report is produced by the UK Office for National Statistics. Changes in retail sales are generally considered an indicator of consumer spending. In general, a high indicator is a positive factor for the GBP, while a low value is a negative factor.
Previous index values: -1.2%, -1.0%, +0.3%, +0.5%, -1.2%, +1.0%, +1.3 (in January 2023) and -3.2%, -2.1%, -3.4%, -3.9%, -3.5%, -5.2% (annualized).
After 06:00 (exact time unknown) JPY Bank of Japan’s press conference
During the press conference, head of the Bank of Japan Kazuo Ueda, who replaced Haruhiko Kuroda in this post in April 2023, will comment on the bank’s monetary policy. Despite the bank’s earlier measures to stimulate the Japanese economy, inflation remains low, production and consumption are falling, which has a negative impact on export-oriented Japanese manufacturers. Markets usually react noticeably to the speeches of the head of the Japanese Central Bank. If he brings up monetary policy during his speech, volatility will increase not only in the yen trading, but throughout Asian and global financial markets.
07:30 EUR Manufacturing PMI of the German economy according to S&P Global. Composite PMI of the German economy according to S&P Global (Preliminary Release)
Nanufacturing and services PMIs are important indicators of business conditions and the overall health of the German economy. These economic sectors form a significant part of Germany’s GDP. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 as negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro.
- Manufacturing PMI: 39.1, 38.8, 40.6, 43.2, 44.5, 44.7, 46.3, 47.3, 47.1, 46.2, 45.1, 47 ,8, 49.1, 49.3, 52.0, 54.8, 54.6,
- Composite PMI: 44.6, 48.5, 50.6, 53.9, 54.2, 52.6, 50.7, 49.9, 49.0, 46.3, 45.1, 45.7 , 46.9, 48.1, 51.3, 53.7, 54.3, 55.1, 55.6.
08:00 EUR Manufacturing PMI. Services PMI. Composite PMI according to S&P Global(Preliminary Release)
The Eurozone Manufacturing and Services PMIs are important indicators of the health of the entire European economy. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 as negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro.
- Manufacturing PMI: 43.5, 42.7, 43.4, 44.8, 45.8, 47.3, 48.5, 48.8 (January 2023)
- Services PMI: 47.9, 50.9, 52.0, 55.1, 56.2, 55.0, 52.7, 50.8 (in January 2023),
- Composite PMI: 46.7, 48.6, 52.8, 54.1, 53.7, 52.0, 50.3, 49.3 (in January 2023).
08:30 GBP UK Manufacturing andServices PMI. Composite PMI according to S&P Global(Preliminary Release)
The UK Manufacturing and Services PMIs are important indicators of the health of the UK economy. The services sector employs the majority of the UK’s working population and contributes approximately 75% of GDP. The most important part of the service industry is still financial services. If the data turns out to be worse than the forecast and the previous value, the pound will most likely decline sharply in the short term. Data better than the forecast and the previous value will have a positive impact on the pound. At the same time, a result above 50 is considered as positive and strengthens the GBP, while a result below 50 as negative for the GBP.
- Manufacturing PMI: 43.0, 45.3, 46.5, 47.1, 47.8, 47.9, 49.3, 47.0, 45.3, 46.5, 46.2, 48 ,4,
- Services PMI: 49.5, 51.5, 53.7, 55.2, 55.9, 52.9, 53.5, 48.7, 49.9, 48.8, 48.8, 50 ,0, 50.9, 52.6,
- Composite PMI: 48.6, 50.8, 52.8, 54.0, 54.9, 52.2, 53.1, 48.5 (in January 2023).
13:45 USD US Manufacturing andServices PMI. Composite PMI according to S&P Global(Preliminary Release)
These PMI business activity indices in the most important sectors of the US economy prepared by S&P Global are important indicators of the state of the American economy as a whole. A result above 50 is considered positive and strengthens the USD, while a result below 50 is considered negative for the US dollar.
Previous PMI indicator values:
- in the manufacturing sector: 47.9, 49.0, 46.3, 48.4, 50.2, 47.3, 46.9, 46.2, 47.7, 50.4, 52.0, 51, 5,
- in the services sector: 50.5, 52.3, 54.4, 54.9, 53.6, 50.6, 46.8, 44.7, 46.2, 47.8, 49.3, 43, 7, 47.3, 52.7, 53.4, 55.6.
- composite PMI: 50.2, 52.0, 53.2, 54.3, 53.4, 52.3, 50.1, 46.8 (in January 2023).
Price chart of GBPUSD in real time mode
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