The Forex Week Ahead September 11th-14th
The Forex Week Ahead USD Hurricane Irma’s arrived in southern Florida Sunday with wind speeds of 125mph. The central part of the projected path now moves straight up the middle of the entire state of Florida with wind speeds of 80–90mph by the time it hits Tampa on Monday. Afterward it moves through Georgia as a tropical storm with projected wind speeds of just 30mph by the time it reaches Atlanta and fizzles out inland. Between Hurricanes Harvey and Irma, the data is going to get very bad for initial jobless claims, nonfarm payrolls and trade deficits as the ports across the region typically export more than they import with both forms of activity likely to shut down, the effects on other indicators like retail sales are more uncertain as sales for emergency items and rations go up in anticipation of disruptions. If data still matters, then Thursday’s CPI is expected to post an accelerated increase in headline price pressures partly reflecting the rise in gasoline prices during August. On retail sales Friday, the challenge will be to keep the headline in the black for the month of August. Other data releases will include producer prices in August on Wednesday that are expected to post quickened headline and core pressures, jobless claims that are expected to continue to rise again on Thursday thanks to Hurricane Harvey (and then when Irma comes into the data), industrial output figures for August on Friday (modest gain expected) and the University of Michigan’s consumer sentiment reading for September on Friday (modest decline expected).
EUR Eurozone data risk should be mild. CPI data revisions for August will come from Germany and Spain on Wednesday and then France and Italy on Thursday. State of the EU speech by European Commission President Jean-Claude Juncker on Wednesday, and a speech by ECB Vice President Constancio on Tuesday will round out the main possible sources of market risk over the coming week.
GBP The Bank of England’s policy meeting on Thursday will be the most closely watched event in the UK. Before Thursday’s BoE decision, CPI for the month of August arrives on Tuesday and, almost as important, wage figures on Wednesday. No policy changes are expected next week but the minutes and forecasts will be scrutinised for any possible tone shifts. Soft Q2 GDP growth counsels continued caution and so does the mild decline in CPI inflation from the peak in May. Pound sterling had been depreciating until around August 24th but it has since appreciated sharply and is back up to heights versus the USD last seen at the 2017 high in early August. Having said that, data has been leaning more toward a slightly hawkish interpretation on balance over recent weeks. If the BoE draws from the Fed’s script and defers reducing reinvestment until the rate normalisation process is “well underway” as the Fed has put it, then markets don’t anticipate that to happen for years, and in the context of ongoing Brexit risks.