FX Week Ahead 2018-09-10

The week ahead starts off on a busy note with China’s inflation figures due to come out for August. It is also a busy week for the British pound which will see the release of the monthly jobs report alongside the newly started monthly GDP figures.

Data from the United States will cover the producer price and consumer price index data for the month of August. The dataset comes out ahead of the FOMC meeting. Although the Fed’s rate hike is almost a done deal, the data will shed more light on how the U.S. economy is faring into the third quarter period.

Super Thursday will see everyone turning their attention to the line of central bank meetings that include the Bank of England and the European Central Bank.

The BoE’s monetary policy meeting is expected to see no major changes. From the ECB, investors will be looking at the central bank forward guidance. The ECB had previously noted that it would end its bond purchases by end of the year. In light of the recent drop in inflation, the forward guidance from the ECB officials will be key.

Here’s a quick recap of the market events due this coming week.

ECB – Status quo unchanged

The European Central Bank will be meeting this week on Thursday. The monetary policy meeting comes after the last ECB meeting that was held in August. No changes were made to the July’s meeting and the ECB’s main message from the June policy meeting remains intact.

The ECB had previously announced its intention to cut its bond purchases from the current 30 billion euro a month to 15 billion starting from October. It later intends to end the 15 billion bond purchases by end of the year. The ECB is expected to stick to this baseline scenario at this week’s meeting. No changes are expected to the ECB’s interest rates either.

The central bank will be releasing its quarterly economic projections at this week’s meeting. Given that the latest flash inflation estimates showed that consumer prices rose at the same as the month before, ECB officials are likely to tread cautiously.

Consumer prices in the Eurozone touched 2.1% briefly before easing back to 2.0% in August according to the inflation estimates. Core CPI, however, has remained around 1.0% for the most part. Furthermore, the ongoing uncertainty with the U.S. administration in regards to the trade tariffs is also an important factor that officials will be considering.

Based on this, the forward guidance from the central bank will be important. At the June meeting, the euro fell after officials said that interest rates would remain unchanged at least until end of summer next year. Investors will be looking to see if that has changed at today’s meeting. Overall, this week’s ECB meeting is likely to spring any new surprises.

Busy week for the pound sterling

The week ahead will continue to be a busy week for the pound sterling. Following last week’s manufacturing, construction and services PMI, this week will see the release of the monthly GDP figures. A newly established statistics, the UK’s Office for National statistics started the monthly GDP release since the past two months.

With the UK’s economy seen recovering after a slow start in the first quarter, investors will be looking at the monthly GDP reports to assess the economy. The British pound continues to remain volatile in the backdrop of the Brexit related news.

Other data includes the monthly ILO unemployment data as well. The UK’s unemployment rate was seen falling to 4.0% in the three months ending July. Despite the drop in the unemployment rate, wage remained weak.

The data comes ahead of Thursday’s Bank of England monetary policy meeting. No changes are expected from the BoE with the markets pricing the next rate hike only sometime toward the latter half of next year.