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The following article is based on research by Marshall Gittler, Head of Investment Research for FXPRIMUS.
FXPRIMUS Indicators and events for week beginning 5 Sep: G20, RBA, Bank of Canada, ECB, trade data
It’s a week of meetings: starting with the G20 leaders’ meeting that ends Monday, then the RBA on Tuesday, Bank of Canada on Wednesday, ECB on Thursday, and EU finance ministers & central bankers meeting Friday and Saturday. Of course, just because they meet doesn’t necessarily mean that they do anything. The G20 in particular is more of a talking shop than a forum for making decisions, while all of of the central banks are expected to keep rates steady. But there will be a lot to watch nonetheless.
The G20 leaders meet against a background of slowing growth and slowing global trade. The question is, what will they agree to do about it? Probably not much. Watch out for what Chancellor Merkel or PM Abe have to say in the press conferences afterwards to see if the talks change their mind about fiscal policy (Merkel) or FX policy (Abe).
The Reserve Bank of Australia (RBA) cut rates at its last meeting a month ago and nothing dramatic has happened since then to force them to cut again. I would expect them to switch to a neutral stance such as they had in July. That could prove positive for AUD, as the market currently is pricing in around a 50% chance of another cut over the next six months but no chance of a hike.
The Bank of Canada too has no need to rush: inflation remains within their target range and growth is bouncing back. Economists expect no change in rates. The decision may not have much impact on the CAD unless they express a strong view one way or the other.
The ECB too has little reason to move right now. Since its last meeting in July, ECB President Draghi’s favorite measure of inflation expectations is down slightly, but other market measures are up, suggesting the inflation outlook hasn’t really changed much. I wouldn’t expect the meeting to move the euro that much.
The indicators from the UK will remain a central focus. So far they have beat expectations handily, in contrast to indicators in other major regions, which are no longer surprising on the upside. This is a major reason why the pound is recovering.
Monday we got the service-sector and composite PMI. The services sector PMI beat expectations, rising sharply to 52.9 from 47.4 (50.0 expected), pushing the composite PMI up to 53.6 – back to where it was in March, before the Brexit fears set in. Other UK data due out this week includes Halifax price houses, industrial production and visible trade.
Several countries other will announce their current account or trade data this week as well, including Australia, Japan and China. China’s trade surplus is expected to rise as both exports and imports fall at a slower yoy pace. That could be encouraging for risky assets, commodities and the AUD. The UK trade deficit is expected to narrow significantly, which could help the pound to rally further.
Several countries also announce their final revisions to GDP, but these are rarely market-moving.
As for today, the US and Canada are on holiday, so activity is likely to be thin in the European afternoon.