The upcoming week presents critical economic indicators from various regions, particularly the Eurozone and Australia, which may influence monetary policies and currency valuations. The Eurozone’s Core Consumer Price Index (CPI) is rolling over. This would lead to more vigorous calls for the European Central Bank (ECB) to cut rates. This expected dovish pivot from the ECB could be important for the British pound. Australia’s unemployment rate holds the line. A surprise drop in employment numbers means that the outlook for the country’s economic confidence is now up in the air.
As the Eurozone’s economic landscape evolves, key figures from Germany and France will play a crucial role in determining the ECB’s next steps. The newfound stability of inflation in this somewhat more tranquil region may temper the imperative for more aggressive further lowering of rates. Further, economic releases from Canada and Japan will play a vital role in providing a full picture of global economic health.
Easing Core CPI and ECB’s Dovish Shift
Most recently, all eyes turned to the Eurozone as its Core CPI fell, raising speculation about an ECB monetary policy pivot. Market analysts suggest that this easing could lead to increased pressure on the central bank to consider lowering interest rates. Depending on how dovish a stance the ECB takes, monetary policy might have to play an enormous role. Not least, this change would increase pressure on the sterling.
The meanwhile economic indicators from important Eurozone states are essential for policymaker decisions in the ECB. Germany’s manufacturing sector continues to demonstrate resilience, while France’s services sector shows signs of stability. These factors might compel the ECB to remain with a more stable rate policy. The effect of making these cuts now would thus be to further weaken the euro.
Analysts are looking closely at the Eurozone’s rigid inflation as an important barometer. This stability gives us confidence that there’s no need for additional rate cuts at this time. The ECB’s management of this process will be key in determining how the market reacts and what direction the currency takes over the next few weeks.
“Real interest rates remain very low. If our economic and price forecasts materialise, we will continue to raise interest rates in accordance to improvements in the economy and prices.” – BOJ Governor Ueda
Australia’s Employment Landscape
In Australia, we’ve been lucky enough to still recently have this data point—a unemployment rate of 4.2% has been remarkably stable. This number is a stunning reversal from August’s payroll gains. Rather than the 21.2k jobs we were supposed to gain, we actually lost 5.4k jobs. Such unexpected shifts in employment figures raise concerns about future economic performance and could influence policy decisions by the Reserve Bank of Australia.
Concerningly, these mixed signals from Australia’s job market may accelerate calls for a closer watch on the course of monetary policy. Despite the current steady unemployment rate providing an indicator of positive outlook, the drop in employment figures indicate possible trouble on the horizon. Market participants will be particularly attuned as these dynamics play out.
Later today, Australia will deliver its preliminary manufacturing PMI print for September. This key barometer will give us important information about overall business sentiment and what it’s like to operate in America’s manufacturing sector. Analysts believed that this figure would be a key indicator of the short-, medium-, and long-term health of the Australian economy.
Global Economic Indicators on the Horizon
Across the pond, the Eurozone and Australia are both making huge strides. Furthermore, other global economic indicators are due out that day, any one of which could move financial markets dramatically. Thus, Canada’s maturity audience for July comes through. Currency traders say a good report showing robust economic growth would raise the value of the Canadian dollar, the Loonie.
The Eurozone will be out with its flash composite PMI index for September. At the same time, Germany and France will release their own preliminary manufacturing and services PMI numbers. These new indicators will use a variety of sources to paint a new picture of economic activity in the region.
In the UK, flash services and CBI trends data for September will give more detail on the business mood. These numbers will give us insight into the mood of the consumer. Closer to home, the United States’ S&P preliminary manufacturing PMI figure is set to be released. Most importantly, it will provide a clearer picture of trends in domestic production.
Finally, Japan’s Tokyo CPI rates for September will be released on Friday. This data will be key to assessing the state of inflationary pressures in Japan. It will likely shape the monetary policy decisions of the Bank of Japan going forward.