FX Week Ahead: FOMC Minutes, Norway, Sweden and US CPI

The week ahead starts off on a quiet note with Japan, US, and Canada closed on account of bank holidays. A rather slow week, the focus will be on the UK’s manufacturing production and construction output data for the month of September. On Wednesday the FOMC meeting minutes will be released. The meeting minutes are from the September FOMC meeting where the central bank announced its balance sheet operational plan.

In the Eurozone, the economic data is mostly second-tier. Flash inflation estimates from Germany and France will likely set the expectations for the Eurozone inflation estimates that will be released the week after.

Here’s a quick recap into this week’s economic calendar for the currency markets.

FOMC Meeting Minutes – More details on balance sheet, Fed plans on rate hikes

The FOMC meeting which concluded last month showed that the Fed would begin its balance sheet operations from October. The meeting minutes will likely show more details on the Fed’s plans on how to carry forward through this plan.

Investors will also be closely scrutinizing the Fed’s deliberations on inflation and the rate hike plans. The US dollar got a break after the FOMC announced that it plans to hike the short-term interest rates one more time this year. The sentiment in the US dollar could be seen coming under pressure in the event that the minutes show a growing dovish camp that prefers to see interest rates being kept steady.

Last week, news wires showed that the US President Donald Trump would be announcing his candidacy for the post of the Federal Reserve Governor in a few weeks time.

With Janet Yellen’s term coming to an end in February, the markets will be looking to see how the next head of the Federal Reserve will steer monetary policy. With quite a few seats on the FOMC vacant, the stakes are high that President Trump could appoint a dovish team that could potentially keep either rates steady or even roll back some of the policies made by the current central bank officials.

This is without a doubt likely to pose a major risk for the US dollar and will bring about uncertainty for the US monetary policy.

Besides the FOMC minutes, the retail sales and CPI data for September will be coming out. Inflation and retail sales numbers could be distorted on account of the hurricanes that hit the US shores in September.

Quiet week from the Eurozone

Economic data from the Eurozone takes a backseat this week as only second-tier data is expected this week. This includes industrial production numbers for France and Germany, followed by the industrial production figures for the Eurozone. The Sentix investor confidence for the Eurozone will also be coming up during the week.

Amid a slow trading week from the Eurozone, ECB President, Mario Draghi will be speaking at an event in Washington DC. With the ECB meeting just a few weeks away, the markets will be closely tuning into any references to monetary policy from Draghi. The week concludes with the final inflation figures from Germany.

Inflation data – Norway and Sweden

Inflation will be the main theme from Norway and Sweden this coming week. Starting off, Norway’s monthly inflation report will be released on Tuesday, 10th October, while Sweden’s inflation data will be coming out later in the week on Thursday, 12th October.

According to the economists polled, Norway’s inflation estimates are expected to rise from 0.9% in August to 1.2% on the core consumer prices for the month of September. This would put the inflation rate in line with the estimates from the Norges Bank.

On a year over year basis, Sweden’s inflation rate remains at 2.1% as of August. The CPIF, another measure of inflation is expected to 0.1% in September. This is a modest increase from August inflation print of 2.3% and will likely put the CPIF at 2.5% on a year over year basis.