The Forex Week Ahead September 4th – 8th
The Forex Week Ahead USD After last week’s flurry of data, this week’s US release schedule is lighter by comparison, in what is a holiday (Labour Day) shortened four day week. The ISM survey of the key non-manufacturing sector will give a timely read on how the economy performed in August. While the headline number fell to an eleven month low in July, the index can be volatile on a monthly basis and is expected to print higher in August, consistent with the view of steady growth in the economy. In terms of Fed updates, the Beige Book is due for release. US Congress will reconvene on 5 Sep (Tuesday) after their August recess. The disastrous Hurricane Harvey may have helped “convince” US Congress to avoid a US government shutdown and a fight over raising the debt ceiling limit this month as the Congress may combine emergency aid for Harvey victims in September with stopgap government funding and a debt-limit increase
EUR With the rowing back in the ECB’s easing bias, this week’s Governing Council meeting will be worthy of attention. While no policy changes are expected, the focus will centre on the meeting statement and President Draghi’s press conference. At its previous meeting in July, it was clear that the ECB was allowing itself flexibility as it assesses its move away from an easing bias towards a more neutral policy stance. President Draghi did state that the ECB would be having a discussion in the autumn on QE. However, he seemed to indicate that any decision may not be forthcoming until the October meeting. Therefore the market will be looking for signs that the ECB may make an announcement on QE tapering next month. Another point of interest will be whether any reference is made to recent euro strength. The ‘account’ of the July meeting showed some concern within the ECB on this issue. However, President Draghi did not address this at Jackson Hole. This month’s meeting also features updated staff macro projections. Meanwhile, in terms of data releases, the Eurozone diary over the coming days is short on highlights. The third estimate of Q2 GDP, German and French industrial production (both July) and the reading of the August PMI’s are the main releases of note.
GBP The immediate outlook for sterling depends very much on the Brexit negotiations and with no progress likely in the short term, the currency may remain under pressure. In the UK, following Friday’s manufacturing survey, we get further PMI data. Market expectations are for the August headline services PMI to remain near the July 53.8 index reading, consistent with reasonable growth in the sector. Industrial output data (July) and house prices (Aug) are the only other noteworthy releases.
JPY the data highlight of the week is the second preliminary GDP data for Q2 (Friday) and the July Maikin labour data (Wednesday). Markets expect real GDP growth to be revised down to 0.5% QoQ from an initial 1.0% (4.0%), reflecting a downward adjustment to real private capex and an upward adjustment to the contribution from real private inventory investment. In the Maikin data, markets estimate that wages continued their gradual rise supported by the labour shortage. The wage data will also give a further indication of summer bonuses, although data for the entire period from June to August will need to be assessed given the variability in the timing of bonus payments each year.