Week Ahead – Rate Hikes Keep Coming

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Week Ahead - Rate Hikes Keep Coming

US

The countdown to the September 13 inflation report begins as investors fixate over a wrath of Fed speak, with special attention going towards Chair Powell's Thursday discussion on monetary policy.

It is a slow start to the trading week as US markets are closed on Monday for Labor Day. Tuesday contains the release of the August ISM services index. Service sector activity is expected to show a modest decline but remain in expansion territory. US trade data will be released on Wednesday, but most of the attention will fall on Lael Brainard’s speech on the economic outlook and the release of the Fed's Beige Book. Michael Barr will also speak on financial system fairness.  Powell's speech on Thursday could be massive as it will be his first time speaking since the Jackson Hole Symposium.  Wall Street is keeping a close eye on initial jobless claims as we still have yet to see any signs of trouble with the labor market as layoffs remain low.  Friday's Fed speak contains appearances by Charles Evans and Christopher Waller.  

Earnings season is finishing up, but stocks will definitely remain in focus as more investors are becoming bearish.  Apple's launch event could be huge as they will unveil the iPhone 14 lineup and the next round of smartwatches.   

EU 

There's no doubt about what the focus next week will be; the only question on everyone's mind is will it be 50 basis points or 75? Markets are increasingly favouring the latter despite the ECB previously hinting at the former. That said, prior to the July meeting they effectively told everyone the first hike would be 25 basis points before opting for 50 so we can probably take things with a pinch of salt for now. Other than that, there's a selection of tier two and three data including final services PMIs, retail sales and revised GDP.

UK 

The UK is heading for a recession, one the Bank of England has seen coming for a long time. When it released its forecasts in August, they looked quite shocking. Since then, expectations have lowered further which will make the Monetary Policy Report Hearing on Wednesday all the more interesting.

That aside, we'll hear from Catherine Mann on Monday and then it's mostly tier two and three data including final services PMI, construction PMI and consumer inflation expectations.

Swift action by the CBR after the invasion meant that not only is inflation not the problem many expected it to be, but the central bank has actually been able to cut interest rates below where they were before in order to try and support the economy. CPI data next week could tell us how much further room the central bank has to cut and ease pressure on the currency.

South Africa

A relatively quiet week with GDP data on Tuesday the only major release. Regardless of the number, a large rate hike, perhaps 75 basis points, is likely on the cards in a few weeks.

Turkey

Inflation is expected to surpass 80% shortly after the CBRT decided to continue its easing cycle with a 1% rate cut to 13%. With the central bank refusing to accept responsibility for soaring inflation, the sky's the limit.

Switzerland

Data last week showed inflation accelerating faster than expected, increasing pressure on the SNB to hike more forcefully. Barring an inter-meeting hike, the focus next week will be on the GDP and unemployment data.

China

This will be a busy week in China as investors keep a close eye on the Chengdu shutdowns and a wrath of economic data that could confirm the trend of weakening economic activity.  FX traders are also closely monitoring the yuan and the possible breach of the 7-handle. 

China's trade data could provide more information on how quickly demand is weakening. Both imports and exports are expected to soften, while government stimulus should provide a boost for aggregate social financing.  

India

Next week brings the services PMI reading for August. Strong economic data releases will allow the RBI to hike rates even further.    

Australia & New Zealand

The greenback's relentless rally has taken the Australian dollar and kiwi to seven-week lows. The global bond market selloff is being led by a surge in Treasury yields and that's kept the interest rate differential widely in the greenback's favour. This week a wrath of economic releases will take a backseat to the RBA rate decision. The RBA may downshift to a slower pace of tightening with only a 25 basis point rate increase.  The bank has raised rates by 175 basis points over the last four meetings, but given the grim outlook, a smaller rate hike could be justified. At the beginning of the week, Australia will release services PMI data, inflation readings, ANZ job advertisements, and current account data.  Second quarter GDP is expected to show a slight improvement and will be released after the RBA decision.  

Economic releases and speeches will be limited for New Zealand.  RBNZ Assistant Governor Silk will speak on Wednesday. The ANZ commodity price index for August will be released on Monday.  A few other third-tier economic releases will also come out in the latter part of the week.    

Japan

The divergence in monetary policy between the Fed and the Bank of Japan may continue to drive the yen’s depreciation against the dollar.  The Japanese yen has been struggling as central banks globally remain very hawkish in fighting inflation.  The BOJ may need a slight change to their policy which could eventually lead to the abandoning of Yield Curve Control (YCC), but that would require a major reversal of BOJ Gov Kuroda's decade-long stance of super loose policy.  

Several important economic indicators will be released over the next week including the services PMI, household spending, the final reading of second-quarter GDP, current account, bank lending, and the eco watchers survey.  

Singapore

There are no major data or risk events in Singapore next week. The Singapore dollar is gaining a lot of attention on Wall Street as many big banks anticipate that Singapore's central bank (MAS) will extend policy tightening.  

Economic Calendar

Saturday, Sept. 3

Economic Events

Global energy crisis in focus as the Nord Stream 1 gas pipeline is scheduled to reopen after 's unscheduled maintenance

Sunday, Sept. 4

No major economic events scheduled

Monday, Sept. 5

Economic Data/Events

US markets closed for Labor Day

New UK PM is announced

Thailand CPI 

Singapore global PMI, retail sales

India services PMI

Australia inflation gauge, job advertisements, inventories, services PMI

China Caixin services PMI

Eurozone retail sales, services PMI

Japan PMI

New Zealand commodity prices

Switzerland GDP

Taiwan foreign reserves

OPEC+ meeting on output

ian PM Shmyhal attends the EU-e Association Council meeting in Brussels

BOE Monetary Policy Committee member Mann speaks

UK Finance publishes its quarterly household finance review of activity

Tuesday, Sept. 6

Economic Data/Events

RBA rate decision: Expected to raise interest rates by 50bp to 2.35%

Australia BoP

Germany factory orders

Japan household spending

Mexico international reserves

South Africa GDP

US primary elections scheduled in Massachusetts

Wednesday, Sept. 7

Economic Data/Events

US trade

Fed Vice Chair for Supervision Barr speaks at an event hosted by the Brookings Institution

Cleveland Fed President Loretta Mester speaks on Market News International webcast

The Fed releases its Beige Book of regional economic activity

Eurozone GDP

Australia GDP, foreign reserves

Canada rate decision: Expected to raise interest rates by 75bps to 3.25%

Poland rate decision: Expected to raise interest rates by 25bps to 6.75%

Germany industrial production

China trade, foreign reserves

Singapore reserves

Japan leading index, coincident index

Apple event, dubbed "Far Out" is expected to feature new iPhones and Apple watches

BOE Governor Bailey appears before the Treasury Committee

Thursday, Sept. 8

Economic Data/Events

ECB rate decision: Expected to raise rates by 50bps to 1.00%

US initial jobless claims

Fed's Powell speaks at Cato Institute

Mexico CPI 

Australia trade

France trade

Japan GDP, BoP

New Zealand manufacturing activity

South Africa current account, manufacturing production

Thailand consumer confidence

Chicago Fed President Evans President speak at College of DuPage economic forum

Federal Reserve Bank of Minneapolis President Kashkari speaks at the "Toward an Inclusive Recovery" virtual event

RBA Governor Lowe speaks at the annual Anika Foundation lunch in Sydney

EIA crude oil inventory report

Friday, Sept. 9

Economic Data/Events

US wholesale inventories

CPI, GDP 

France industrial production

Mexico industrial production

Canada unemployment

China CPI, PPI, aggregate financing, money supply, new yuan loans

Japan money stock

New Zealand truckometer heavy traffic index, card spending

Thailand foreign reserves, forward contracts

EU energy ministers extraordinary meeting to tackle energy crisis in Brussels

President Biden travels to the new Intel facility in Ohio to discuss the Chips Act

Sovereign Rating Updates

Finland (Fitch)

Netherlands (Fitch)

Norway (S&P)

Portugal (S&P)

e (S&P)

Source: Week Ahead - Rate Hikes Keep Coming