Events and economic data this week
Forex traders will focus this week on Wednesday’s FOMC meeting and Thursday’s BoE meeting. Both central banks expect high rates.
This Monday will be the funeral of Queen Elizabeth II. As a result, there will be a public holiday in the UK and UK markets will be closed. On Wednesday, the FOMC will meet to decide whether the Committee should raise US rates by 75 basis points or 100 basis points. Although 75 basis points is expected, stronger than expected, the US CPI data over the past few weeks has left some Fed watchers bewildered. Also, will the Bank of England meet on Thursday to decide how much it should raise rates? An increase of 75 basis points was originally expected, but over the past month, expectations have fallen to 50 basis points. Also note that there will be a FTSE reshuffle this week. It was supposed to take place on Monday, but because of the holiday it was postponed to Tuesday.
Bank of England
The meeting of the Bank of England on the interest rate was to be held last week. However, due to the death of Queen Elizabeth, the meeting has been rescheduled for Thursday. The Bank of England raised rates by 50 basis points at its August meeting to cut its key rate to 1.75%. At the time, the Bank of England predicted that inflation could reach 13.3% in October and remain high for much of 2023. In addition, the central bank predicted that a recession would begin in the fourth quarter of 2022. Markets immediately turned to prices. in a rate hike of 75 ps at the September meeting. However, last week the UK released data on the consumer price index, which showed that inflation fell from 10.1% year on year in July to 9.9% year on year in August. Moreover, due to the recent cap on energy prices, many economists now expect inflation to be below the 13.3% estimated in October. The Bank of England will provide an update this week. As for the economy, retail sales slowed down significantly in August. Heading fell from +0.4% in July to -1.6% in August. The expectation was -0.5%. The Ex-Fuel seal dropped by the same amount. Markets are now leaning 50bp higher. for the Bank of England this week.
The FOMC is due to meet on Wednesday this week to decide on the interest rate in September. The FOMC is expected to raise rates by 75 basis points. The consumer price index for August last week was 8.3% y/y against the expected 8.1% y/y and the previous value of 8.5% y/y. While the numbers were better than expected, the underlying inflation rate caught the attention of the markets. The core consumer price index for August amounted to 6.3% y/y against expectations of 6.1% y/y and the previous value of 5.9% y/y. The data not only exceeded expectations, but also significantly exceeded the July figures. This has led to expectations of a 100 basis point rate hike this week. At some point after the release of the CPI, expectations for a 100 basis point rise rose to almost 50%. However, coolness seems to be prevailing as the markets are now estimating a 100 basis point rate hike with 16% probability (meaning that the markets are also estimating a 75 basis point rate increase with 82% probability). The number of jobs continues to impress, with the August NFP of 315,000 and U.S. initial jobless claims falling for the fifth consecutive week to 213,000 in the week ending Sept. 10.
Quarter Time: FTSE Reshuffle Time. The reshuffles will take place on Tuesday due to a public holiday on Monday, but will take effect from Monday. The FTSE shuffling occurs when FTSE Russell calculates the valuations of UK companies to decide which stocks should be placed in which index. Abrdbn, Hikma and Howden to leave FTSE 100.
FedEx surprised markets after Thursday’s close by canceling its FY2023 guidance, which sent equity markets lower on recession fears. There are a few companies to keep an eye on this week. Will they drop the tip as well? Here are some important earnings reports to watch this week: COST, ACN, HLN, CINE, KGF, GIS, LEN, DRI.
Economic data and other central banks
Markets were surprised last week by stronger-than-expected US CPI data. Can we see more surprises this week? Obviously, the focus this week will be the FOMC meeting on Wednesday and the BoE meeting on Thursday. However, there are other central banks to keep an eye on this week. These include Riksbank, BOJ, SNB, Norges Bank and SARB. Any surprises from these central banks could cause volatility in their respective currencies. In addition, Australia will publish minutes of its latest meeting, Canada will publish its CPI for August, and Flash PMI for manufacturing and services will also be released. Other important economic releases this week include:
Monday – September 19, 2022
Canada: IPP (August)
USA: NAHB Housing Market Index (SEP)
Japan: CPI (August)
Australia: RBA meeting minutes
Tuesday – September 20, 2022
Germany: producer price index (AUG)
Sweden: Riksbank interest rate decision
Canada: consumer price index (August)
USA: Building Permit (AUG)
United States: Housing Start (AUG)
Wednesday – September 21, 2022
United Kingdom: CBI Industrial Trends (SEP) Orders
US: Existing Home Sales (AUG)
USA: FOMC decision on interest rates
Crude oil reserves
New Zealand: balance of trade (AUG)
Japan: BoJ decision on interest rates
Thursday – September 22, 2022
Switzerland: SNB decision on interest rates
Norway: Norges Bank interest rate decision
Mexico: mid-month inflation rate (SEP)
UK: BoE decision on interest rates
USA: current account (T2)
South Africa: SARB decision on interest rates
EU: Consumer Confidence Data (SEP)
USA: Kansas Fed Manufacturing Index (SEP)
Global: Global Manufacturing and Services (SEP) Flash PMI
New Zealand: Westpac Consumer Confidence (Q3)
Friday – September 23, 2022
UK: GfK Consumer Confidence Index (SEP)
United Kingdom: CBI Distributive Trades (SEP)
Canada: retail sales (July)
See » Economic calendar
Chart of the week » Gold (XAU/USD) by week
Source: Tradingview, Stone X
The price of gold (XAU/USD) reached a local low for the week since August 13, 2018 at the level of 1160.25. Over the next 2 years, the precious metal rose aggressively, and in August 2020, gold hit a new all-time high of 2075.11! The price then retreated and tested previous lows around 1670. However, the price began to rise and during the week of March 7, 2022 it tested previous all-time highs and failed, forming a starburst evening over the week period. Since then, gold has gone down a descending channel. The precious metal tested the 1670 level again last week but broke it to reach an intra-week low at 1654.25! Having broken through the level of 1670 (split), he created a double top pattern on the weekly timeframe. The target for the double top is the height of the double top on the neck line, added to the break point of the neck line. In this case, the target is near 1275, just above the April 2019 support. However, if the price is to reach its target, gold first needs to overcome the 50% retracement level from the August 2013 low to the August 2020 high at 1617. 68. Below, the price could fall to support the lower trend line of the down channel around 1565 and then the 61.8% Fibonacci retracement level of the previously mentioned time frame. However, if the break of 1670 proves to be a false break, first resistance will be at 1735.21 weekly highs and then at 1807.91 on Aug 8 weekly highs. Above, gold could hit a weekly high on June 13 at 1879.16.
Markets will focus this week on Wednesday’s Fed meeting and Thursday’s BoE meeting. Both central banks expect high rates. However, both could surprise the markets and forex traders by going higher than expected. Also, keep an eye out for potential volatility related to this week’s earnings reports as well as economic data around the world. Also watch the spot gold price to see if it can trade below 1670 and stay there. If so, the price of gold could drop a lot!
Joe Perry, CMT, FOREX.com » Official site
Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not warrant its accuracy or completeness and shall not be liable for any direct, indirect or consequential damages that may result from anyone relying on such information.