The report of the US Department of Labor published on the first Friday of the month supported the market participants and economists in their forecasts that the Fed leaders will leave the interest rate unchanged. Now, according to the Chicago Mercantile Exchange (CME), with a probability of almost 93% the Fed’s interest rate will remain at 5.50% following the results of the September meeting (September 19-20). With a probability of about 60%, market participants are also counting on its increase in November.
Next week (Thursday 14 September), the next meeting of the ECB will take place. It is expected that following this meeting, the key interest rate and the ECB deposit rate for commercial banks will be increased by 0.25% (up to 4.50% and 4.00%, respectively). However, it is also possible that ECB leaders will take a pause in increasing the rates, given the growing risks of a recession in the European economy, as evidenced by important macro data from the Eurozone. This may be negatively perceived by market participants, which will put additional pressure on the euro.
Next week (11.09.2023 – 17.09.2023) market participants will also pay attention to important macro statistics from the UK, US, Australia, and China.
* 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 12
06:00 GBP Average wages of the British for the last 3 months. Unemployment rate
Every month, the Office for National Statistics (ONS) publishes a report on average wages including the period for the last 3 months, with and without bonuses.
This report is a key short-term indicator of the dynamics of changes in wages of employees in the UK. Wages growth is a positive factor for the GBP, while a low value of the indicator is negative. Forecast: The September report suggests that the average wages with bonuses rose again in the last calculated 3 months (May-July), after an increase of +8.2%, +6.9%, +6.5%, +5.8%, +5.9%, +6.0%, +6.5%, +6.%, +6.1%, +5.5%, +5.2%, +6.4% , +6.8%, +7.0%, +5.6%, +4.8%, +4.3%, +4.2% in previous periods); wages without bonuses also increased after growth of +7.8%, +7.3%, +7.2%, +6.7%, +6.6%, +6.6%, +6.7%, +6.5%, +6.1%, +5.8%, +5.5%, +5.2%, +4.7%, +4.4%, +4.2%, +4, 2%, +4.1%, +3.8%, +3.7%, +3.8% in previous periods). Thus, the data points to the continued growth of wages, which is a positive factor for the pound. If the data turns out to be better than the forecast and / or previous values, the pound is likely to strengthen in the foreign exchange market. Data worse than forecast/previous values will have a negative impact on the pound.
Also at this time the office publishes data on unemployment in the UK. It is expected that for 3 months (May-July) unemployment was at the level of 4.2% (against 4.2%, 4.0%, 3.8%, 3.9%, 3.8%, 3.7% , 3.7%, 3.7%, 3.7%, 3.6%, 3.5%, 3.6%, 3.8%, 3.8%, 3.8%, 3.7% , 3.8%, 3.9%, 4.1%, 4.2%, 4.3%, 4.5%, 4.6%, 4.7%, 4.8%, 4.7% , 4.8%, 4.9%, 5.0%, 5.1%, 5.0% in previous periods).
Since 2012, the UK unemployment rate has steadily declined (from 8.0% in September 2012). This is a positive factor for the pound, while a rise in unemployment is a negative factor.
If the data from the UK labor market turns out to be worse than the forecast and / or the previous value, the pound will be under pressure.
In any case, at the time of publication of data from the British labor market, increased volatility is expected in the quotes of the pound and on the London Stock Exchange.
Wednesday, September 13
12:30 USD Consumer Price Index
Consumer Price Index determines the change in prices of a selected basket of goods and services over a given period and is a key indicator for assessing inflation and changing consumer preferences. Food and energy are excluded from the Core CPI indicator to obtain a more accurate estimate.
A high result strengthens the US dollar, because the likelihood of a Fed rate hike increases, and a low result weakens it.
Previous values (in annual terms):
- CPI: +3.2%, +3.0%, +4.0%, +4.9%, +5.0%, +6.0%, +6.4% (in January 2023),
- Core CPI: +4.7%, +4.8%, +5.3%, +5.5%, +5.6%, +5.5%, +5.6% (in January 2023)
The data presented suggests some slowdown in the growth rate of consumer inflation after strong growth in the previous months of 2022, when annual inflation in the United States reached a 40-year high of 9.1% in June.
If the data turns out to be weaker than the forecast, the dollar is likely to react with a short-term decline. Data stronger than the forecast will strengthen the dollar.
Thursday, September 14
01:30 AUD Employment rate. Unemployment rate
The employment rate reflects the monthly change in the number of employed Australian citizens. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for the AUD, while a low value is negative. Previous values of the indicator: -14,600 in July, +32,600 in June, +75,900 in May, -4,300 in April, +53,000 in March, +64,600 in February, -11,500 in January, +14,600 in December, +64,000 in November, + 32,200 in October, +900 in September, +33,500 in August, -40,900 in July, +88,400 in June, +60,600 in May, +4,000 in April, +17,900 in March, +77,400 in February, +12,900 in January 2022 .
Also at the same time, the Australian Bureau of Statistics will publish a report on the unemployment rate – an indicator that assesses the ratio of the unemployed population to the total number of able-bodied citizens. Growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. A decrease in the indicator is a positive factor for the AUD.
Forecast: Unemployment in Australia remained at its lowest level in August at 3.7% (against 3.7% in July, 3.5% in June, 3.6% in May, 3.7% in April, 3.5% in % in March and February, 3.7% in January, 3.5% in December, 3.4% in November and October, 3.5% in September and August, 3.4% in July, 3.5% in June, 3.9% in May and April, 4.0% in March and February, 4.2% in January), and the employment rate rose again.
The RBA officials have repeatedly stated that in addition to the situation in international trade, the Australian economy and the central bank’s monetary policy plans are affected by indicators of the level of debts and household spending, growth in wages of workers, as well as the state of the country’s labor market. If the values of the indicators turn out to be worse than the forecast, the Australian dollar may decline significantly in the short term. Better-than-expected data will strengthen the AUD in the short term.
12:15 EUR ECB rate decision
The ECB will publish its decision on the key rate and on the deposit rate. The ECB’s tight stance on inflation and the level of key interest rates contributes to the strengthening of the euro, a soft position and rate cuts weaken the euro. Given the high level of inflation in the Eurozone, according to the ECB management, the balance of risks for the economic outlook for the Eurozone “remains skewed to the negative side.”
“The Governing Council believes that interest rates will still need to rise significantly … in order to ensure a timely return of inflation to a medium-term target of 2%,” the ECB said in a statement following the December meeting.
Speaking at the World Economic Forum in Davos in January 2023, the ECB President Christine Lagarde said that “inflation expectations are not easing” and “the ECB will continue to raise rates.” In her opinion, “inflation is too high”, and “the ECB intends to bring it down to 2% in a timely manner.”
The ECB believes that GDP growth may decline due to the energy crisis in the EU, high uncertainty, weakening global economic activity and tightening financing conditions. However, the recession should not drag on too long, although strong growth is not expected either.
“In the near future, growth will recover as the current headwinds ease. Overall, according to Eurosystem staff forecasts, the economy will grow by 0.5% in 2023, 1.9% in 2024 and 1.8% in 2025.”
Thus, if we follow this signal from the head of the ECB, following this meeting, the key interest rate and the ECB deposit rate for commercial banks will be increased again, most likely by 0.25% (up to 4.50% and 4.00%, respectively). But other, tougher solutions are not ruled out (an increase of 0.5% or even 0.75%).
Well, since inflation in the Eurozone is still unacceptably high for the leaders of the ECB, they can announce an increase in interest rates at the next meetings.
Perhaps this will also be mentioned in the accompanying statements of the leaders of the ECB.
12:30 USD Producer Price Index (PPI). Retail sales. Retail control group
Producer Price Index estimates the average change in wholesale prices determined by producers at all stages of production. It is one of the leading measures of inflation in the US and measures the average change in wholesale producer prices.
As rising production costs push up wholesale prices, this eventually pushes up consumer inflation as well. The growth of inflation (in normal economic conditions) usually puts upward pressure on the quotes of the national currency, since it implies a tighter monetary policy of the Central Bank.
Previous values: +0.3% (+0.8% YoY), +0.1% (+0.2% YoY), -0.3% (+0.9% YoY) , +0.2% (+2.3% YoY), -0.5% (+2.7% YoY), -0.1% (+4.9% YoY), + 0.7% (+5.7% YoY) in January 2023.
If the data turns out to be better than the forecast (higher than the forecast values), the dollar is likely to strengthen. And, conversely, data below the forecast and previous values will put less pressure on the Fed when it makes its next decision to tighten monetary policy, which will have a negative impact on the dollar.
Retail sales. This Census Bureau report reflects the total sales of US retailers of all sizes and types. The change in retail sales is the main indicator of consumer spending. The report is a leading indicator and data may be heavily revised in the future. A high result strengthens the US dollar, a low result weakens it. A relative decrease in the indicator may have a short-term negative impact on the dollar, and an increase in the indicator will have a positive effect on the USD. In the previous month (July), the value of the indicator was +0.7%, +0.2% (after +0.3%, +0.4%, -1.0%, -0.6%, +3.2%, -0.8%, -1.1%, +1.1%, -0.2%, +0.7%, -0.4%, +1.0% in previous months).
Retail sales is the main indicator of consumer spending in the US showing the change in retail sales. The Retail Reference Group measures volume across the entire retail industry and is used to calculate price indices for most products. A high result strengthens the US dollar, and vice versa, a weak report weakens the dollar. A slight increase in indicators is unlikely to accelerate the growth of the dollar. The data worse than the values of the previous period (+1.0%, +0.6%, +0.2%, +0.7%, -0.3%, +0.5%, +2.3%, -0, 3%, -0.5%, +0.4%, +0.5%, +0.4%, +1.1% in the previous months of 2022) could negatively impact the dollar in the short term.
12:45 EUR ECB press conference. ECB Monetary Policy Statement
The press conference will be of major interest to market participants. During its course, a surge in volatility is possible not only in euro quotes, but also on the entire financial market, if the ECB leaders make unexpected statements. The ECB leaders will assess the current economic situation in the Eurozone and comment on the bank’s decision on rates. In previous years, as a result of some meetings of the ECB and subsequent press conferences, the euro exchange rate changed by 3% -5% in a short time.
A soft tone of statements will have a negative impact on the euro. And, on the contrary, a tough tone of the speech of the ECB management regarding the monetary policy of the central bank will strengthen the euro.
Friday, September 15
02:00 CNY Industrial production. Retail sales index
China is the largest buyer of raw materials and a supplier of a wide range of finished products to the world commodity market. China’s economy is the second largest in the world after America’s. Therefore, the publication of important macroeconomic indicators from China can have a strong impact on the entire financial market.
At the same time, China is the largest trade and economic partner of Australia and New Zealand and the buyer of raw materials from these countries.
Therefore, positive macro statistics from China may also have a positive impact on the quotes of these commodity currencies. If the expected data will speak of a slowdown in one of the world’s largest economies, this is a negative factor for global stock markets and commodity currency quotes.
China’s National Bureau of Statistics report on industrial production data shows the output of Chinese industrial enterprises such as factories and manufacturing facilities. Growth of the indicator (industrial production) is a positive factor for the yuan, also indirectly signaling the possibility of accelerating inflation, which may put pressure on the People’s Bank of China in the direction of tightening monetary policy. Conversely, a decline in the index could have a negative impact on the yuan.
Previous values (in annual terms): +3.7%, +4.4%, +3.5%, +5.6%, +3.9%, +2.4% (in February 2023).
Retail Sales Level Index is released monthly by China’s National Bureau of Statistics and evaluates the total volume of retail sales and cash generated. The index is often considered an indicator of consumer confidence and economic well-being and reflects the state of the retail sector in the near term. The growth of the index is usually a positive factor for the CNY; a decrease in the indicator will negatively affect the CNY. Previous index value (in annual terms): +2.5%, +3.1%, +12.7%, +18.4%, +10.6%, +3.5%, -1.8% , -5.9% (after rising +8% in the last months of 2019 and falling -20.5% in February 2020).
The data suggests an uneven pace of recovery after a strong drop in February-March 2020. If the data turns out to be weaker than the forecast or previous values, the CNY may weaken sharply.
14:00 USD University of Michigan Consumer Confidence Index (preliminary release)
This indicator reflects the confidence of American consumers in the economic development of the country. A high level indicates growth in the economy, while a low level indicates stagnation. Previous values of the indicator: 69.5 in August, 71.6 in July, 64.4 in June, 59.2 in May, 63.5 in April, 62.0 in March, 67.0 in February, 64.9 in January 2023, 59.7 in December, 56.8 in November, 59.9 in October, 58.6 in September, 58.2 in August, 51.5 in July, 50.0 in June, 58.4 in May, 65.2 in April, 59.4 in March, 62.8 in February, 67.2 in January 2022. An increase in the indicator will strengthen the USD, and a decrease in the value will weaken the dollar. The data shows uneven recovery of this indicator, which is negative for the USD. Data worse than previous values may have a negative impact on the dollar in the short term.
Price chart of EURUSD in real time mode
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