The Week Ahead: Global Currencies Brace for Impactful Economic Data Releases

Highlights

• US ISM Non-Manufacturing PMI and the Jobs Report to dictate the Fed interest rate path.
• The RBA and the RBNZ will deliver monetary policy decisions as investors fret about higher for longer monetary policy stances.
• China private sector PMIs and US Government shutdown updates will set the tone for the week.

For the Dollar:

The ISM Manufacturing PMI will kickstart a big week for the US dollar. A deeper contraction across the manufacturing sector would raise fears of a hard landing. While the manufacturing sector accounts for 20% of the US GDP, investors will likely become more sensitive to weak numbers.

On Tuesday, the JOLTs Job Openings will be the first monthly labor market report for investors to consider. The markets must assess whether the aggressive Fed interest rate trajectory is starting to hit labor market conditions.

The September ADP nonfarm employment change numbers will also be a precursor to the US Jobs Report. While the numbers will influence Fed bets on Wednesday, the all-important ISM Non-Manufacturing PMI may impact the dollar more. The US services sector contributes over 75% to the US economy. An unexpected contraction would spook the markets.

On Thursday, the weekly jobless claims will draw interest ahead of the US Jobs Report on Friday. Investors should consider the nonfarm payrolls, unemployment rate, and wage growth. The focus on demand-driven inflation could give wage growth more weightage.

Beyond the numbers, Fed Chair Powell speaks on Monday. FOMC members Harker and Williams will also deliver speeches on Monday.

For the EUR:

The manufacturing sector will be in focus on Monday. Barring marked revisions to the German PMI, the Italian and Eurozone manufacturing PMIs will have more influence on the EUR.

The manufacturing sector contributes less than 30% to GDP. However, improving trade terms could see the manufacturing sector have more influence on the euro area economy.

On Wednesday, the more significant services sector PMI will influence investor sentiment toward the Eurozone economy. Revisions to the Eurozone PMI will impact investor sentiment more.

German trade (Thurs) and factory orders (Fri) close out a busy week for the EUR.

Beyond the numbers, investors should monitor the ECB calendar for ECB commentary throughout the week. ECB Chief Economist Philip Lane will speak on Tuesday and Thursday, with ECB President Christine Lagarde on the Calendar to speak on Wednesday.

For the Pound:

The Pound may experience a choppy week as the private sector comes into the spotlight.

Finalized manufacturing and services PMIs will garner investor interest on Monday and Wednesday.

However, revisions to the services PMI will impact the Pound more. Downward revisions could kickstart another Pound sell-off.

Housing sector numbers also need consideration, with house price reports out on Monday and Friday. A more marked decline in house prices would reflect a deteriorating housing sector. A deteriorating housing market environment would impact consumer confidence and consumption.

Beyond the numbers, Bank of England member speeches also need consideration.

For the Loonie:

Two reports will influence the Loonie. Trade data for August will draw interest on Thursday ahead of employment figures on Friday.

Beyond the numbers, updates from the OPEC meeting and market risk sentiment will also impact buyer appetite for the Loonie.

Out of Asia:

For the Aussie Dollar:

The Aussie Dollar will sit in the hands of the RBA on Tuesday. Recent inflation numbers could force the RBA to maintain a hawkish policy stance despite softer retail sales figures.

In the second half of the week, trade data (Thurs) and finalized retail sales (Fri) also need consideration.

The RBA will also be in the spotlight again, with the Financial Stability Review out on Friday. An elevated interest rate environment has weighed on households. Increased concerns about the housing sector and rising default risks would likely impact the Aussie dollar.

Private consumption is a key contributor (50%) to the economy. Rising defaults on personal loans and mortgages would adversely impact consumer confidence and consumption.

From elsewhere, private sector PMI numbers from China will set the tone.

For the Kiwi Dollar:

The RBNZ interest rate decision will provide direction to the Kiwi Dollar over the near term. While the markets are betting on the RBNZ to leave the cash rate at 5.50%, the Rate Statement needs consideration.

From elsewhere, the private sector PMIs from China will set the tone ahead of business confidence numbers on Tuesday.

A pickup in business confidence would likely offer pre-RBNZ price support.

For the Japanese Yen:

Tankan survey-based figures for the third quarter will kickstart the week for the Japanese Yen.

Mid-week, finalized services PMI numbers for September will need consideration. Revisions to the Flash PMI will influence investor sentiment toward the Japanese economy. The services sector contributes over 65% to GDP.

On Friday, household spending figures for August will be the significant numbers for the week. Bank of Japan Governor Ueda has highlighted the importance of wage growth and increased consumption as prerequisites for a policy shift away from negative interest rates. Another unexpected fall in household spending would leave the BoJ in its ultra-loose monetary policy stance.

Out of China

The Chinese markets are closed throughout the week for the National Day holidays. However, the Caixin services and manufacturing PMIs will influence the appetite for the commodity currencies on Monday.

Economists forecast the Caixin Manufacturing PMI to rise from 51.0 to 51.2, with the services PMI up from 51.8 to 52.0. The Report will be out on Sunday.