The Week Ahead: Monetary Policy in Focus with the BoJ, the Fed, and the BoE in Action

Highlights

• The Bank of Japan, the Fed, and the Bank of England deliver monetary policy decisions this week.
• US labor market numbers and service sector PMI figures could influence the Fed rate path.
• Private sector PMIs from China also need consideration.

For the Dollar:

Employment costs, consumer confidence, and the housing sector will be in focus on Tuesday. Consumer confidence and employment figures are likely to garner more interest. An upward trend in employment costs and consumer confidence could signal a positive consumption outlook.

On Wednesday, ADP nonfarm employment, JOLTs Job Openings, and manufacturing sector PMI numbers will draw investor attention. JOLTs Job Openings and the ADP numbers will likely influence bets on a Fed interest rate hike.

However, the numbers may have a limited impact on the US dollar. The Fed interest rate decision, rate statement, and press conference will impact the US dollar and the global financial markets. With the markets betting on the Fed leaving rates unchanged, forward guidance will be the key.

Nonfarm productivity and unit labor costs for Q3 and weekly jobless claims need consideration on Thursday. A pickup in productivity and tight labor market conditions could support a more hawkish Fed.

On Friday, the US Jobs Report and ISM Non-Manufacturing PMI survey will wrap up a busy week. Wage growth and the unemployment rate will be focal points. An upward trend in wage growth would fuel consumption and demand-driven inflation, leaving a hawkish Fed rate path to counter.

For the EUR:

German inflation and GDP numbers will kickstart the week for the EUR/USD. Hotter-than-expected inflation numbers and a German economic contraction would test buyer demand for the EUR.

On Tuesday, German retail sales will draw interest. However, Q3 GDP numbers and October inflation figures for the Eurozone will have more impact on the EUR/USD. French GDP and inflation numbers also warrant consideration before the Eurozone data.

On Thursday, Manufacturing PMI numbers will influence buyer appetite for the EUR/USD. The Italian Manufacturing PMI and revisions to PMIs for Germany and the Eurozone need attention.

German trade data and Eurozone unemployment figures will also provide direction on Friday.

Beyond the numbers, ECB commentary requires monitoring. ECB Chief Economist Philip Lane is on the calendar to speak on Thursday. ECB Executive Board members Luis de Guindos (Mon/Tues), Isabel Schnabel (Thurs), Andrea Enria (Mon), and Edouard Fernandez-Bollo (Thurs) will also deliver speeches.

For the Pound:

The Bank of England will put the Pound in the spotlight on Thursday. Recent UK economic indicators may have forced the BoE to leave interest rates unchanged. However, sticky inflation and elevated wage growth remain concerns.

The MPC Meeting Minutes and BoE Governor Andrew Bailey will dictate the impact of the policy decision on the Pound. A decision to leave rates unchanged, with a dovish tone, will pressure the Pound.

Economic indicators also need consideration. UK house prices and Manufacturing PMIs will be in focus on Wednesday. On Friday, revisions to the UK Services PMI will likely impact appetite for the Pound more.

On Friday, BoE Chief Economist Huw Pill is on the calendar to speak. Comments relating to the economy, inflation, and monetary policy need consideration.

For the Loonie:

Canadian GDP figures for August will influence the buyer appetite for the Loonie on Tuesday. On Friday, employment figures also need consideration.

Beyond the numbers, Bank of Canada commentary will garner investor interest. Senior Deputy Governor Rogers and Governor Macklem are on the calendar to speak on Tuesday and Thursday.

Out of Asia:

For the Aussie Dollar:

Retail sales will influence the appetite for the Aussie dollar on Monday. Better-than-expected figures could fuel bets on an RBA rate hike. On Thursday, trade data also needs consideration.

From elsewhere, private sector PMIs from China will impact the AUD/USD pair. The NBS and Caixin Manufacturing PMIs are out on Tuesday and Wednesday before the Caixin Services PMI on Friday.

For the Kiwi Dollar:

The Kiwi dollar sits in the hands of the RBNZ and market risk sentiment. On Wednesday, the RBNZ Financial Stability Report will draw investor interest. RBNZ Governor Orr is also on the calendar to speak on Wednesday.

From elsewhere, the PMI numbers from China also need consideration.

For the Japanese Yen:

The Bank of Japan (BoJ) will impact buyer appetite for the Japanese Yen this week. On Tuesday, the BoJ will deliver its interest rate decision. The markets expect the BoJ to leave interest rates in negative territory. However, revisions to inflation forecasts and forward guidance on monetary policy will garner investor attention.

Upward revisions to inflation forecasts could force the BoJ to signal a possible move away from its ultra-loose monetary policy stance.

Out of China

NBS private sector PMIs will draw investor interest before the Caixin private sector PMIs on Wednesday and Friday. The Caixin Manufacturing (Wed) and Caixin Services PMIs (Fri) will influence market risk sentiment. A pickup in private sector activity would support the view that stimulus measures are effective.