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FX Week Ahead: US Payrolls, ECB meeting minutes

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The markets open a new trading week and a fresh quarter. The focus will be on the monthly economic reports and indicators. Data from the US will be dominating the newswires, for the most part, this week. Among the central bank meetings, the RBA’s meeting is coming up this week, and no changes to interest rates are expected.

From the Eurozone, the focus turns to the ECB’s monetary policy meeting minutes which could offer traders some insights into the central bank’s decision later this October. Here is a brief recap of the main events that will shape the currency markets this week.

Busy week for the US dollar

The week ahead will be dominated by the economic reports from the United States. Among the releases lined up, the ISM’s manufacturing PMI and Friday’s official payrolls data stand out. The economic releases will cover the period of September. It was a weak month with the hurricanes seen making an impressionable impact on the economy.

The Federal Reserve had already prepared the markets about the potential impact from the hurricanes which is expected to hit jobs and growth in the economy. Based on this, it is not surprising to note that the US payrolls report forecast is one that is below the trend.

According to the economists polled, the US economy is expected to add a meager 88k jobs in the month of September. However, on the bright side, the unemployment rate is expected to remain steady at 4.4%. But there is a scope that the unemployment rate could also increase. Manufacturing payrolls are however expected to rise just 8k for the month of September.

Economists are hoping that the wages for September will rise 0.3% on the month.

Besides the Friday’s payrolls report, the ISM’s manufacturing PMI will also be coming out earlier on Monday. According to the median estimates, manufacturing PMI in the US is expected to slip modestly to 58.0, down from 58.8 seen the month before. Markit’s manufacturing PMI is however expected to remain steady at 53.0 for September.

Overall, the economic data from the US could potentially help to bring more conviction about the Fed’s plans to hike interest rates one more time. The probability of a rate hike for the remainder of the year continues to increase following the Fed’s forward guidance at its meeting in September.

Eurozone: ECB Minutes, Unemployment rate

Data from the Eurozone this week will see the release of the monetary policy meeting that was concluded in September. With the markets expecting that the tapering decision will come out in October, any clues from the meeting minutes could further strengthen this conviction. The ECB will be meeting later this month in October.

The unemployment rate for the Eurozone is also scheduled for release this week. Economists are expecting to see the unemployment rate slip to 9.0%. The basis for an improvement in the unemployment rate comes on the back of strong growth momentum. Just last week, flash estimates showed that the Eurozone inflation rate was stable at 1.5%, suggesting that the ECB could be in a strong position to announce its tapering decision.

Besides the above data points, the monthly PMI numbers for the Eurozone and the regional economies will be coming out this week.

RBA expected to hold rates steady

The Reserve Bank of Australia will start off the month of October with its monetary policy meeting. Economists polled expect the RBA to hold the interest rates steady at 1.50% at this month’s meeting. However, there are rising expectations that the RBA could soon begin to tighten interest rates.

This comes as the RBA held rates steady last month and signaled that wage growth would eventually result in the strengthening of the Australia labor market. Australia’s unemployment rate has remained steady at 5.6% for the past two months after rising from 5.5% previously.

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