Bumper week for economic announcements with a political backdrop

It’s another hectic week for the markets, as central banks all release important announcements and key economic data flows from all corners of the globe. Today, Wednesday 18th September, is the big day for a number of important economic releases, followed by even more over the coming days.

United States in the spotlight

The eyes of the markets are trained on the US this afternoon, as the Federal Reserve is making key announcements that pertain not just to an expected cut in interest rates, but discussion that should set the tone for US monetary policy and provide valuable insights into the state of the US economy. While US President Donald Trump wants a big rate drop down to zero, the Fed is unlikely to go this far given the current global economic situation. Most expect a small decrease.

Canadian data will also be illuminating

Markets will also watch the latest releases from Canada with interest to glean signs of the sense of direction for Canada’ monetary policy. Canada also releases their August Consumer Price Index (CPI) today and their latest retail sales data on Friday 20thMarkets have an optimistic outlook for Canada and do not expect interest rates to fall at the next meeting of the Bank of Canada. This hasn’t helped the Canadian Dollar against its currency partners, but positive figures this week could provide a boost against a US Dollar that has been weakening recently.

Bank of England and Brexit in focus for Sterling this week

In the UK, as well as the usual Brexit back and forth, the latest Consumer and Producer Price inflation figures were released, putting the Pound under pressure as figures fell to a 32-month low. Last month’s results were a welcome surprise, coming out better than expected, so this was a blow for a previously perky Pound, which fell against its major currency partners in reaction to the disappointing figures and more Brexit clouds as Jean-Claude Juncker brought no deal Brexit fears back to the fore.

On Thursday 19th September, the Bank of England (BoE) Monetary Policy Committee (MPC) is due to meet, and governor Mark Carney’s words often have the potential to shift Sterling, so investors will be keeping a close eye on developments. He has already spoken this week about negative interest rates and his opinion that they are not viable for the UK economy.
 
UK Retail Sales data is also released on Thursday, always a key indicator of the health of UK economic health and an important benchmark before the Brexit due date. Positive figures could boost the Pound; any negativity will be felt even more in light of Brexit uncertainty.

European data also on the radar

The Eurozone also released its August inflation report on Wednesday, which was a bit of a mixed bag. Euro Area Core Inflation remained stable at 1.1%, below the ECB’s target inflation of 2% and remains at almost a 12-month low, despite the various monetary stimuli injected into the Eurozone economy. Meanwhile, prices in the service sector rose from the previous month’s 1.2% to 1.3%. Europe is also feeling Brexit fears affect their economy, as recent results show continued signs of slowdown.

Bank of Japan could shed light on effects of US-China tensions

Following the Fed, the Bank of Japan (BoJ) is due to give its latest monetary policy announcement on Thursday 19th September. Numerous reports are pointing at an easing of monetary stimulus and markets are pricing in a further rate cut for the short term. Speculation about a move to further negative position is already taking its toll on the Japanese Yen. We could see it fall further against its key currency counterparts tomorrow, and volatility is likely across the currency markets.

The latest export figures for Japan may also offer some insight into the ripple effects of the US-China trade tariffs. Japan will follow with their Consumer Price Index on Friday.