Monday will be relatively quiet, with no significant scheduled events for the FX market, but the rest of the week will be packed with economic announcements.
On Tuesday, Japan will release the BoJ Core CPI y/y, while the U.S. will publish durable goods orders m/m, the CB consumer confidence, and new home sales.
On Wednesday, Australia will release inflation data, after which the focus will shift to the RBNZ monetary policy announcement in New Zealand. In the U.K., the annual Budget will be released, while Canada will announce its monetary policy decision. Meanwhile, in the U.S., markets will focus on the highly anticipated FOMC meeting.
On Thursday, the U.S. will release its advance GDP q/q figure, the core PCE price index m/m, and unemployment claims. The ECB will also announce its monetary policy decision for the Eurozone.
Finally, on Friday, Japan will release the Tokyo Core CPI y/y, followed by the BoJ monetary policy announcement.
Traders should remember that Europe switched back to standard time on Sunday, and should also keep an eye on the month-end rebalancing, which could contribute to market volatility.
In Australia, the consensus for the monthly CPI is 0.7% vs. 0.4% prior and for CPI y/y it’s 4.2%, up from 4.0% previously. The trimmed mean CPI is forecasted to print 0.3% m/m compared to 0.2% previously.
Westpac analysts expect a slightly cooler monthly print, forecasting September CPI to rise 0.6% m/m, lifting the monthly annual pace to 4.1% y/y. The largest monthly gains are expected from recreation and culture, followed by transport.
On the quarterly series, Westpac expects Q3 CPI to rise 1.3% q/q, keeping the quarterly annual rate steady at 3.9% y/y. The underlying inflation is projected to remain elevated with the trimmed mean expected to rise 0.9% q/q, while Westpac’s monthly trimmed mean for September is 0.3%, holding the annual rate at 3.6% for a fourth consecutive month.
At this week’s meeting, the RBNZ is expected to deliver a 25 bps rate hike, lifting the OCR to 3.00%. Markets are pricing in further increases even though inflation data printed softer than expected.
According to the latest outlook, higher oil prices, a weaker NZ dollar, and resilient economic growth have raised the risk of inflation exceeding 4% in the fourth quarter. Recent comments from RBNZ officials have reinforced expectations for an October hike, taking a hawkish tone.
Analysts from ING believe the tightening cycle could prove even more prolonged, with an additional hike in December or February depending on incoming data. They project a terminal rate of 3.25%–3.50%.
For this week’s BoC meeting, the consensus is for a 25 bps rate increase, taking the overnight rate to 2.50%. The odds of a hike are above 80% following the latest comments from Governor Tiff Macklem, who stressed that elevated oil prices pose inflation risks.
However, analysts from Wells Fargo believe that a softer-than-expected September inflation, easing underlying price pressures, and a weakening labour market could make the case for holding rates unchanged.
Meanwhile Scotiabank analysts believe the hike is already largely priced into the swap market, so the CAD’s reaction will depend more on the BoC’s forward guidance than on the decision itself. Any hints of consecutive rate hikes could provide further support for the Canadian dollar.
Looking further ahead, markets are pricing in around 100 basis points of cumulative tightening by the end of 2027, despite limited evidence that inflation warrants such an aggressive response. This leaves the CAD vulnerable to disappointment if upcoming data or the BoC’s decisions fail to meet the market’s hawkish expectations.
In the U.S., the Fed is expected to keep the federal funds rate unchanged. Since the last meeting, inflation data has surprised to the upside, but recent FOMC member comments hinted that policymakers would prefer to wait before making another move.
This week’s meeting is unlikely to bring any surprises, and since we won’t get updated economic projections or a dot plot, there’s also a good chance there won’t be any changes in the policy statement.
Fed Chair Warsh is unlikely to deliver clear guidance on the path ahead, but he may strike a hawkish tone given elevated inflation data, ahead of a potential hike in December. Another thing to watch is the Fed’s internal task forces, which are expected to present their findings around year-end, so they could get some attention in the coming months.
At its own meeting this week, the ECB is also expected to keep rates unchanged at 2.50%. The current political and fiscal situation in France is putting pressure on further policy decisions, as it drives borrowing costs higher.
Inflation in the Eurozone remains a cause for concern, sitting above the 2% target, with headline inflation printing 3.8% in September and core inflation sitting at 2.5%. Economic growth is projected to remain resilient in Q3, which would support future rate hikes.
Analysts from Wells Fargo expect a rate hike in December, but that depends on what happens with the bond markets. A French fiscal fix would give some breathing room, but if the bonds sell-off turns disorderly and impacts the Eurozone’s other heavily indebted members, a hike becomes less likely.
In the U.S., the consensus for the core PCE price index m/m is 0.3% vs. 0.2% prior; for personal income m/m it is 0.3% compared to 0.2%, and for personal spending m/m it is 0.6% vs. 0.9% previously.
Consumer spending is likely to remain resilient, supported by continued growth in both goods and services consumption and personal income is also likely to show an increase. Wells Fargo analysts note that stronger income revisions and rising household wealth continue to support spending despite the high borrowing costs and persistent inflation.
The report will be released after the FOMC meeting, so it may not cause too much volatility, with the market’s focus staying mainly on inflation data.
The U.S. advance GDP q/q will also be released this week, and the consensus is 3.2% vs. 2.2% prior, with the increase driven by consumer spending and business investment, especially in the high-tech sector.
Wells Fargo analysts argue that even though consumer spending may moderate in the near future, firmer income fundamentals will allow households to keep supporting growth in the coming months.
At this week’s meeting, the BoJ is widely expected to keep the policy rate unchanged at 1.25% to assess the impact of the 25 bps hike it delivered at the last meeting.
Inflation remains a cause for concern, sitting above the Bank’s 2% target, and financial conditions are described as accommodative, which leaves room for further tightening. Traders will be monitoring the BoJ’s updated forecasts, along with the Tokyo inflation data due for release on Friday. The consensus for the Tokyo core CPI y/y is 2.6%, down from 2.7%.
The Bank is expected to continue its hiking cycle in the future, with Wells Fargo analysts expecting the next hike in December and another one in 2027. Meanwhile, analysts from ING forecast the next hikes for January and April. Both expect the rate to reach 1.75% next year.
This article was written by Gina Constantin at investinglive.com.
