After the Fed meeting took place in the middle of the month, at which the US central bank lowered its key interest rate by 0.25% to 2.00%, last week the meetings of 3 more major world central banks took place.
The Bank of Japan, the National Bank of Switzerland, and the Bank of England refrained from changing their current monetary policy. However, the leaders of these central banks did not rule out the possibility of easing the monetary policy of their banks in the future. At the same time, the National Bank of Switzerland announced the possibility of currency interventions in order to avoid a significant appreciation of the franc, and the governor of the central bank of Japan Haruhiko Kuroda said that he is now more inclined to soften monetary policy than at a meeting in July, noting concern about the global economy. "There are no signs of recovery in foreign economies", Kuroda said at a press conference after a meeting of the Bank of Japan last Thursday.
Increased volatility last week was also observed in oil quotes. At the beginning of last week, oil prices rose sharply after media reports that oil refineries in Saudi Arabia were attacked by drones.
Representatives of Saudi Arabia and the United States accused Iran of attack.
Subsequently, oil prices fell amid Saudi Arabia’s harsh rhetoric regarding Iran, continued recovery in supply after attacks on the oil infrastructure in Abkayk, as well as statements by the International Energy Agency (IEA) that they were ready to take the necessary measures, however, at present They don’t see the need for this.
Next week, the decision on the rate takes RB of New Zealand. The interest rate is likely to remain at the same level of 1.00%, after in August the RBNZ cut the rate at once by 0.50%, surprising the market participants.
Also, next week, investors will pay attention to the publication of important macro statistics for Germany, the Eurozone, New Zealand, and the USA.
As always, the publication of a number of important macroeconomic data is expected during the new trading week and number important news will be published.
*) specified time – GMT
Monday, September 23
07:30 EUR Index of Business Activity (PMI) in the manufacturing sector of the German economy according to Markit Economics (preliminary release)
The PMI business activity index in the manufacturing sector of the German economy is an important indicator of business conditions and the general state of the German economy. This sector of the economy forms a significant part of German GDP. A result above 50 is seen as positive and strengthens the EUR, below 50 - as negative for the euro.
Forecast for September (preliminary release): 44.0. Previous values: 43.5 in August, 43.2 in July, 45.0 in June, 44.3 in May (after falling from the level of 49.7 in January), which indicates a yet unbroken tendency to slow down business activity in this sector of the German economy. The growth of the indicator may support the euro (in the short term), although its value is still below the value of 50.
08:00 EUR Composite Index (PMI) of business activity in the German economy according to Markit Economics (preliminary release)
The PMI Composite Business Activity Index in the German economy is an important indicator of the business environment and the general state of the German economy. A result above 50 is seen as positive and strengthens the EUR, below 50 - as negative for the euro.
Forecast for September (preliminary release): 51.4 (against 51.7 in August). If the data coincide with the forecast or turn out to be better, then the euro will strengthen (in the short term). Data worse than forecast will have a negative impact on the euro.
08:00 EUR Composite Index (PMI) of business activity in the manufacturing sector of the Eurozone economy according to Markit Economics (preliminary release)
Eurozone PMI is an important indicator of the state of the entire European economy. A result above 50 is seen as positive and strengthens the EUR, below 50 - as negative for the euro.
Forecast for September (preliminary release): 51.9 against 51.9 in August, 51.5 in July, 52.2 in June, 51.8 in May, which is likely to positively affect the euro in the short term.
Tuesday, September 24
05:35 JPY Speech by the head of the Bank of Japan Kuroda
During his speech, the head of the Bank of Japan Kuroda is likely to give some comments on the monetary policy of the bank. According to the results of the meeting, the Bank of Japan board decided to leave the key rate at -0.1%, and the target level of yield on 10-year government bonds is about zero, but said that it would more carefully examine the state of economics and prices at the meeting scheduled for October 30-31.
Kuroda reiterated that policy easing options include lowering interest rates, lowering the target level of 10-year government bond yields, which is now near zero, increasing asset purchases and accelerating the increase in the monetary base. However, he said that he did not see the need to change the current concept of monetary policy, but made it clear that he was now more inclined to relax monetary policy than at the meeting in July.
09:55 AUD Speech by RBA Head Philip Lowe
In the course of his speech, Philip Lowe will give an assessment of the current situation in the Australian economy and point out further plans for the monetary policy of the agency entrusted to him. Any signals from him regarding the change in the plans of the RBA monetary policy will cause a sharp increase in volatility in AUD trading and in the Australian stock market. If he does not touch on the topic of monetary policy, then the reaction of the market to his speech will be weak.
23:50 JPY Bank of Japan Monetary Policy Committee Meeting
The committee will analyze the economic situation in Japan and provide guidance on possible future prospects for the financial policy of the Bank of Japan. If the tone of the protocol indicates the firm intentions of the Bank of Japan regarding monetary policy in the country, this will negatively affect the Japanese stock market and strengthen the yen. Conversely, soft rhetoric regarding the prospects of the bank's monetary policy will contribute to the weakening of the yen and the growth of the Japanese stock market.
As a result of the last meeting, the Bank of Japan maintained its extra soft monetary policy unchanged. The bank's board decided to maintain the key short-term rate at -0.1% and the zero target yield level of 10-year government bonds.
At the same time, the Bank of Japan said that at the meeting scheduled for October 30-31, it would more carefully examine the state of the economy and prices. Options for easing bank policy may include lowering interest rates, lowering the target level of return on 10-year government bonds, increasing asset purchases, and accelerating an increase in the monetary base.
Wednesday, September 25
02:00 NZD Decision RB of New Zealand on the interest rate. RBNZ Covering Statement
The current interest rate in New Zealand is at 1.0%. In August, the RBNZ unexpectedly lowered the rate immediately by 0.5%, explaining this decision by the aggravation of the trade war between the US and China and the loss of momentum in the New Zealand economy.
"World economic activity continues to weaken, which reduces the demand for goods and services from New Zealand. Increased uncertainty and reduced international trade contribute to lower economic growth in the trading partner countries", the RBNZ said in a statement.
The RBNZ believes that wage growth remains weak. At the same time, inflationary expectations are falling, and low levels of business confidence indicate a slowdown in hiring and wage growth.
Restrained economic growth (New Zealand's GDP growth has slowed since the second half of 2018) and a weakening labor market, as well as an escalation of international trade wars and a worsening global economic outlook, are pushing the Reserve Bank of New Zealand to keep interest rates low.
It is expected that at this meeting the RBNZ will not change its monetary policy, however, it can provide guidance on its future plans.
In an accompanying statement, the RBNZ management will explain the decision on the interest rate and comment on the economic conditions that contributed to this decision.
At this time, the volatility in trading on the New Zealand dollar could rise sharply.
Earlier, the RBNZ stated that against the backdrop of “a multitude of uncertainty factors,” the monetary policy “will remain soft in the foreseeable future”, but “can be adjusted accordingly”. According to the bank’s management, for a stable recovery of the New Zealand economy and inflation growth “a lower New Zealand dollar rate is needed”.
Probably, the head of the RBNZ Adrian Orr will once again confirm the bank’s penchant for pursuing a soft monetary policy, which will preserve the pressure on the New Zealand currency.
Thursday, September 26
12:30 USD Annual US GDP for the 2nd quarter (final release)
GDP data is one of the key (along with labor market data and inflation) for the Fed in terms of its monetary policy. A strong result strengthens the US dollar; weak GDP report negatively affects the US dollar. In the previous quarter, GDP growth amounted to + 3.1%, in the 4th quarter of 2018 + 2.2%.
The forecast for the 2nd quarter of 2019 + 2.0% (preliminary forecast was + 1.9%). Despite a relative decline, it is still a good indicator of GDP growth. Nevertheless, data weaker than the forecast may negatively affect dollar quotes.
23:30 JPY Tokyo Consumer Price Index (CPI) (excluding fresh food prices)
This consumer price index, published by the Bureau of Statistics of Japan, reflects the assessment of price dynamics obtained by comparing the retail prices of the corresponding basket of goods and services. Tokyo's CPI, excluding fresh food prices, which is an important barometer of changes in consumer trends, came out in August with a value of + 0.7% (in annual terms).
Forecast for September: + 0.5%. Inflation in Japan is still low. The growth of the indices may trigger the strengthening of the yen. However, a decrease in the indicator is likely to negatively affect the yen.
During the publication of CPI indices, the volatility of trading on the yen and the Japanese stock market is expected to increase, especially if the actual values will significantly differ from the forecast.
Friday, September 27
12:30 USD Orders for capital goods (excluding defense and aviation)
The indicator reflects the value of orders received by manufacturers of capital goods (capital goods are durable goods used for the production of durable goods and services), implying large investments. Goods manufactured in the defense and aviation sectors of the US economy are not included in this indicator. A high result strengthens the USD. In July, the indicator came out with the value 0.2%, in June 1.5%, in May - with a value of 0.5%, and in April - with a value of -1.0%.
Expected growth in August is + 1.0%, which is likely to positively affect the dollar in the short term. Data worse than forecast will negatively affect dollar quotes.
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