Weekly Market Outlook (23-27 September)

Upcoming Events:

• Monday: Japan on holiday, Australia/Eurozone/UK/US spot PMIs.
• Tuesday: Japan PMI, RBA Monetary Policy Decision, German IFO, US Consumer Confidence.
• Wednesday:Australia Monthly Consumer Price Index.
• Thursday:SNB Monetary Policy Decision, US Durable Goods Orders, US Q2 Final GDP, US Unemployment Claims.
• FridayTokyo CPI, Canada GDP, US Personal Spending Index.

Monday

Monday will be the day of spot PMIs for several major economies, with Eurozone, UK and US PMIs being the highlights:

• Eurozone Manufacturing PMI: 45.6 expected vs. 45.8 previously.
• Eurozone Services PMI: 52.1 expected vs. 52.9 previously.
• UK Manufacturing PMI: 52.5 expected vs 52.5 previously.
• UK Services PMI: 53.5 expected vs 53.7 previously.
• US Manufacturing PMI: 48.5 expected vs. 47.9 previously.
• US Services PMI: 55.3 expected vs. 55.7 previously.

Tuesday

The Reserve Bank of Australia is expected to keep the cash rate unchanged at 4.35%. There should be nothing new as the central bank continues to maintain its hawkish stance amid persistently high inflation.The market is expected to see the first rate cut in February 2025 with a total of 101 basis points of easing by the end of next year.

The U.S. Consumer Confidence Index is expected to come in at 103.8 versus 103.3 previously. The latest report was somewhat of a surprise. “Consumer confidence rose overall in August but It remained within the narrow range that prevailed during the past two years.“.”

Consumers continued to express mixed feelings in August. Compared to July, they were More positive about working conditions, both current and future, but also more concerned about the labor market“.”

“Although consumers’ assessments of the current labor situation remained positive, they continued to weaken, and assessments of the future labor market were more pessimistic. This is likely to reflect the recent increase in unemployment rates.Consumers were also less optimistic about future income.”

Wednesday

Australian monthly CPI is expected to come in at 3.1% y/y versus 3.5% previously. RBA Governor Bullock said that One inflation report won’t change their minds. As they will wait for more data to increase their confidence that inflation is returning to target, so unless we get significant deviations, this release is unlikely to change anything.

Thursday

The Swiss National Bank is expected to cut interest rates by 25 basis points to 1.00%. The market is pricing in a 45% chance of a larger cut of 50 basis points. The reason for this is that The inflation was somewhat surprising. With the latest release showing a decline to 1.1%, well below the Swiss National Bank’s forecast of 1.5% for the third quarter.

Moreover, Jordan is from the Swiss National Bank. He said in late August The continued strength of the Swiss franc has had a negative impact on Swiss industry. Therefore, There is a high probability that the central bank will cut interest rates by 50 basis points. (especially after the recent move by the Fed) or Destabilizing the currency by threatening to intervene.

US unemployment claims remain one of the most important data to follow each week, as they are a more accurate indicator of the state of the labor market.

Initial claims remain within the 200,000 to 260,000 range that has been established since 2022, while continuing claims, after rising steadily over the summer, have started to improve significantly in recent weeks.

Initial claims this week are expected to come in at 225k vs. 219k previously, while there is no consensus on continuing claims at the time of writing although the previous release showed a decline to 1,829k.

Friday

Tokyo core CPI is expected to come in at 2.0% y/y versus 2.4% previously. Tokyo CPI is seen as a leading indicator of the national CPI, so it is more important to the overall market than the national figure.

The Bank of Japan left everything unchanged in its latest policy decision as expected but Governor Ueda made a sudden turn toward doves. “There is some time to make a decision on monetary policy because the risk of rising prices has decreased in light of recent movements in the foreign exchange market,” he said.

He also mentioned that It is important for them to check external economic trends including the United States when making policy decisions.This suggests that the Fed’s 50bp rate cut makes the bank wary of further yen appreciation and reduces the need for more hawkish action. The USD/JPY pair rose after his comments…

The US CPI is expected to come in at 2.3% YoY vs. 2.5% previously, while the monthly figure is expected at 0.1% vs. 0.2% previously. The core CPI is expected at 2.7% YoY vs. 2.6% previously, while the monthly figure is expected at 0.2% vs. 0.2% previously.

Forecasters can reliably estimate the personal spending index as soon as the CPI and PPI are released, so the market already knows what to expect.. Federal Reserve member Waller said last Friday that they expect 0.14% on the core inflation measure on a monthly basis.

The Fed’s main focus in recent months has been on the labor market, so inflation data has lost some of its importance in terms of market reaction.

Interestingly, Waller, a member of the Federal Reserve Board, stated that Inflation data during the blackout prompted him to support a bigger cut.What worried him most, he added, was that inflation was weaker than he had thought.

Finally, he said he supported two more 25 basis point cuts by the end of the year if the economy developed as he expected, but If labor market data worsens, or if inflation data continues to come in weaker than everyone expected, he will favor moving at a faster pace. Before adding that A fresh spike in inflation could also prompt the Fed to pause on cutting interest rates..

This week’s release shouldn’t be of much importance overall since it’s August data and has already been incorporated into the Fed’s decision.