Week Ahead

Next week will be dominated by interest rates decisions by the major central banks including Federal Reserve, Bank of England and Bank of Japan. Also in the focus will be inflation rates for Japan and Canada, Ifo Business Climate for Germany, and housing data in the US. Finally, investors will be awaiting flash services and manufacturing PMI figures for US, UK, Euro Area, France, Germany, Australia, and Japan.

Federal Reserve’s interest rate decision will be the most important event. A hotter-than-expected US inflation reading and signs that the job market remains robust cemented expectations for a third consecutive 0.75 percentage point rate hike, a move that would lift the fed funds rate to a target range of 3% to 3.25%. While less likely, signs of inflation becoming entrenched sparked speculation that a full percentage point increase could be on the table. Investors will also keep a close on building permits and existing home sales data for further detail about the housing market. Other releases in the US calendar include US S&P Global PMI for September. Elsewhere in America, it will be interesting to follow the interest rate decision of the Brazilian central bank.

Across the Atlantic, the Bank of England may hike the main rate by 75 bps next Thursday, the most since the 1992 exchange rate crisis, following a cumulative 165 bps increase since December last year. The annual inflation rate in the UK unexpectedly eased for the first time since December 2021 in August but is projected to accelerate again in the coming months. At the same time, more data is pointing to a looming recession in the country, with markets expecting flash September PMIs to show factory activity contracted for the second month, albeit at a slower pace and services activity stalled. Investors will also await Gfk consumer confidence, CBI distributive trades and public sector net borrowing.

Elsewhere in Europe, the Swiss National Bank is set to increase its policy rate by 75 bps, bringing borrowing costs to a positive level for the first time since 2011. Also, central banks in Turkey, Sweden and Norway will decide on the course of monetary policy. On the economic side, flash PMIs for the Eurozone, Germany and France are likely to point to a further deterioration across both the manufacturing and the services sector in September, and consumer confidence across the 19-bloc is set to weaken. Other data to follow include Euro Area construction output and current account; Germany producer prices; Spain and Netherland Q2 final GDP growth; Switzerland balance of trade and Turkey consumer survey.

In Australia, the RBA will divulge minutes from its meeting earlier this month, sharing insights behind the central bank’s fourth consecutive 50bps rate hike. Investors also await flash PMI figures for September. In neighboring New Zealand, releases include services PMI and foreign trade data for August.

In Asia, an important week for releases in Japan kicks off with August’s CPI report and monetary policy decision by the Bank of Japan. While the short-term interest rate is expected to remain at -0.1%, investors will watch out for any measures to protect the yen amid its ongoing plunge. In China, the PBoC will carry out its policy decision after it cut its Loan Prime Rates for the second time this year last month. Borrowing costs are also set to rise for Indonesia and the Philippines, in addition to multiple central banks that tend to follow the decision by the Federal Reserve. In the meantime, investors await fresh CPI releases from Malaysia and Singapore, and trade data from Thailand.