Market Outlook for the Week of September 05-09

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Market Outlook for the Week of September 05-09

<p class="MsoNormal">The week will start
with a holiday in the U.S. and Canada, but on Monday we'll have the OPEC-JMMC
meetings which, according to the WSJ, are likely to come with an announcement
that OPEC+ is freezing output.</p><p class="MsoNormal">On Tuesday we have
the RBA rate statement and the cash rate in Australia and the ISM Services PMI
in the U.S. For Australia we'll also have the GDP q/q on Wednesday, along with
the Monetary Policy Report Hearings in the U.K. and the BOC rate statement and
overnight rate in Canada. Fed members Mester and Brainard are also scheduled to
speak. </p><p class="MsoNormal">The ECB press
conference and main refinancing rate are expected Thursday for the Eurozone.
Jerome Powell is scheduled to speak a bit later that same day, but he will
participate in a moderated discussion at the Cato Institute's Annual Monetary
Conference. Nothing different from his last speech is expected, but it's worth
keeping an eye on it nevertheless, as the ECB meeting could be quite
disappointing.</p><p class="MsoNormal">The Canadian
employment change and unemployment rate are expected on Friday, rounding up the
week.</p><p class="MsoNormal">Last week, the Swiss
franc was negatively impacted by the KOF indicator as it printed below
expectation with its lowest reading since July 2020. This highlighted that the
Swiss economy is affected to a larger degree by the bad economic outlook in
Europe. The CHF fell immediately after the release due to the market's reaction
but recovered the following day.</p><p class="MsoNormal">The CPI came higher
than expected at 3.5%, marking the steepest rise in consumer prices since
August 1993. Following Governor Jordan's recent comments at Jackson Hole
Symposium, this will definitely trigger a hawkish reaction at the September SNB
meeting.</p><p class="MsoNormal">At this week's
meeting, the RBA is expected to hike the rate by 50 bps and to continue its
hawkish tone. Governor Lowe said at the last meeting that hikes are not on a
pre-set path so it's possible that after this meeting we'll see only 25 bps
rate hikes until the end of the year. There are many factors that can influence
the Bank's decision and traders need to watch developments closely. </p><p class="MsoNormal">The U.S. ISM Services
report Tuesday will come on the heels of a better-than-expected manufacturing
ISM last week. July's services report printed higher than all forecasts at
56.7, but there was still pessimism among managers in the sector regarding
economic weakness and fears of recession. According to Wells Fargo, the August
report expected this week may benefit from falling gas prices, which enables consumers
to spend more on services.</p><p class="MsoNormal">The BOC is likely to
hike the rate by 75 bps this week. It's hard to believe after the last CPI data
that inflation has cooled down, so it's hard to believe the Bank will pause the
hiking cycle in the near future. </p><p class="MsoNormal">As far as the ECB
goes, a 75-bps hike was already priced in by the market based on analysts'
consensus, but now it seems that a 50 bps rate hike is more plausible. Isabel
Schnabel delivered many hawkish comments lately, but all eyes are on Christine
Lagarde who hasn't said much on the matter and the potential path for ECB's
monetary policy.</p><p class="MsoNormal">The eurozone economy
is prone to a mild recession due to the energy crisis, especially after
Friday's news that the Nord Stream 1 pipeline will remain shut down for an
indefinite period of time. Europe has a high inflation rate, but it's not as
pronounced in core elements and is not showing up in wages, according to Morgan
Stanley analyst Andrew Sheets. This means the ECB might not react too
aggressively.</p><p class="MsoNormal">USD/CAD expectations</p><p class="MsoNormal">On the H1 chart the
pair didn't break above the 1.3185 level of resistance which could suggest a
move to the downside. A correction is expected until the 1.3065 level of
support. If broken, the next support is at 1.2980. </p><p class="MsoNormal">A hawkish message
from the BOC will likely support the CAD. From a technical point of view,
USD/CAD looks more prone to the downside in the short term, especially giving
the weak closing for the USD last week which could extend into this week.</p><p class="MsoNormal">On the upside the
next level of resistance is at 1.3215.</p><p class="MsoNormal">This article was written by Gina Constantin.</p>

This article was written by ForexLive  at www.forexlive.com.

Source: Market Outlook for the Week of September 05-09

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