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A week before the Fed’s rate decision (20 September), several US risk events will be on the watchlists for many traders and investors this week, including US CPI and PPI inflation data, industrial production, and retail sales numbers. Of relevance, do also remember that Fed officials will enter the blackout period from 9 September, meaning we’ll be free of Fed speak this week until the rate decision.
The main highlight for the week will be the US CPI release on Wednesday at 12:30 pm GMT. Consumer price inflation is anticipated to rise slightly again in August to 3.6% for the headline print, though economists estimate that a drop in core CPI—excludes food and energy prices—could be seen. From July to August, the MoM reading is expected to jump 0.5%, up from 0.2% the prior month, while the core reading for the same period is forecast to match July at 0.2%.
Across the pond, UK jobs and pay numbers will be widely watched this week on Tuesday morning at 6 am GMT. You will recall that regular pay (excluding bonuses) increased to 7.8% in the three months to June (compared with a year ago), and pay, including bonuses, jumped 8.2% for the same period. For the July release, current forecasts show both releases are expected to match the previous month: 7.8% and 8.2%, respectively. This would likely add pressure on the Bank of England (BoE) to raise rates again this month.
BoE Governor Andrew Bailey also testified to the Treasury Committee last week and communicated that policy is now restrictive, and the central bank is ‘much’ nearer to the top of the policy tightening cycle ‘on the basis of current evidence’.
The BoE rate decision is scheduled on 21 September, and markets are leaning towards another 25bp increase (70% probability as of writing), a move that would pull the Official Bank Rate to 5.5%.
Finally, the ECB rate decision is due on Thursday at 12:15 pm GMT. Markets are pricing about a 60% chance that the central bank will leave all three key benchmark rates unchanged. Needless to say, it is a close call whether they hike or not, but should they indeed go forward with a hike, this, according to many desks, may be the last hike in this cycle; a pause, however, would snap nine consecutive rate hikes.
You may recall that ECB President Christine Lagarde deviated from standard communication in July’s presser and made note that the central bank does not have that much more ground to cover, meaning a pause is certainly on the table, which could further weigh on Europe’s single currency this month.
G10 FX (5-Day Change):
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