Weekly Market Outlook: RBA & BoC meetings

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The week ahead looks to a new trading month with the central bank meetings and some key economic indicators coming out from the United States.

The data over the week will certainly bring some volatility back as investors wait for more signals from policymakers.

The week, however, promises to start on a quiet note. The US markets are closed on Monday in observance of the Labor Day holiday. However, the momentum picks up as the week progresses.

Brexit will also continue to remain in the spotlight over the week and a number of speeches from various Fed officials will keep investors busy. Here’s a quick look into the week ahead.

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RBA to Kick Off Central Bank Meetings this Week

The Reserve Bank of Australia will be holding its monetary policy meeting amid a rather busy week for the Australian dollar.

Expectations are for the central bank to keep interest rates unchanged this week. But a host of economic reports over the week will certainly keep policymakers glued to economic data.

Trade Tensions to Keep AUD in Check

The escalating trade tensions between the United States and China will certainly influence the data from Australia.

This week, we will get to see the import/export data for the second quarter alongside the business inventories report. The data will provide initial insights into the second quarter GDP performance for the region.

The Australian economy is forecast to have risen 0.5% in Q2. The hawkish forecasts show that momentum in growth might have increased, supported by lower interest rates.

July’s trade figures along with retail sales reports will likely give a better overview of the GDP growth.

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Bank of Canada to Hold Rates Steady

Another big-ticket item this week will be the interest rate decision by the Bank of Canada. The central bank is expected to keep interest rates unchanged at 1.75% at this week’s meeting.

Last Friday’s better than expected GDP data has pushed the Canadian GDP to beat the BoC’s GDP forecasts. However, while the domestic economy seems to be in better shape, the global headwinds remain a cause for concern.

Investors speculate that the central bank will likely cut rates in October. But it would be too early to tell. Given the recent trade rhetoric and the domestic conditions, the central bank would prefer to bide for more time.

Canada’s Jobs Data in Focus

With the BoC’s decision more or less a done deal, investors will shift focus to Friday’s jobs report from Canada. Economists expect the Canadian economy to add about 12.5k jobs in August.

This follows a decline of 24.2k jobs in the month before. The jobs data will be crucial in the larger narrative. A better than expected report on the jobs side will certainly convince investors that the anticipated rate cut could be pushed further down the line.

Investors Asses US Economic Data for Q3

This week will mark economic reports from the United States that will give investors insights into the third-quarter performance. This includes the monthly manufacturing and non-manufacturing PMI reports. The labor market report is due on Friday which also gains importance.

With the US economy seen expanding at a slower pace of just 2.0% in the second quarter, this week’s data will give early insights into how the US economy is faring, going into Q3.

ISM Manufacturing and NMI to Rise Modestly

The manufacturing and non-manufacturing PMI’s from the Institute for Supply Management could give a mixed picture.

More importantly, the manufacturing sector could see a modest rebound. However, economists expect that the manufacturing sector could fall further down to 51.0, from 51.2 previously.

The non-manufacturing sector PMI is forecast to rise to 53.8.

US Payrolls in Focus

Amid a slowing economy, the labor market comes under scrutiny. Economists expect that the US unemployment rate will remain unchanged at 3.7% in August.

In the previous month, the US unemployment rate was at 3.2%. Average hourly earnings continue to rise at a steady pace of 0.3% on the month.

For August, expectations are for payrolls to rise a modest 159k comparing to 164k headline figure in the previous month.

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