The Week Ahead – Rate Hikes on the Horizon? Key Indicators to Watch This Week

On the Macro

The economic calendar will give investors more to think about. US nonfarm payrolls, wage growth, and inflation numbers could cement a September Fed rate hike.

Eurozone inflation numbers could also pressure the ECB to tighten policy further despite the grim PMI numbers for August.

After the hawkish Fed Chair Powell speech, central bank commentary needs consideration this week.

For the Dollar:

Consumer confidence and JOLTs job openings kickstart the week on Tuesday. On Friday, Fed Chair Powell opened the door to further rate hikes. A pickup in consumer confidence and steady job openings would support a more hawkish Fed policy outlook. Tight labor market conditions fuel consumer confidence, which drives consumption and demand-driven inflation.

On Wednesday, ADP nonfarm employment change and Q2 GDP figures need consideration. The ADP figures historically deviate from the US Jobs Report, which should limit the impact of the numbers on risk sentiment. However, revisions to Q2 GDP numbers would move the dial.

The PCE Price Index Report and jobless claims figures will affect market sentiment toward monetary policy. A decline in initial jobless claims, pickup in personal spending, and sticky inflation would raise bets on a September Fed rate hike.

Economic indicators on Friday could cement the Fed policy decision, with the US Jobs Report in focus. Wage growth and the nonfarm payroll numbers will be the focal points. A steady unemployment rate and a pickup in wage growth would drive hawkish Fed bets.

For the EUR:

The EUR will be in the hands of prelim inflation numbers for August and consumer sentiment and spending numbers.

On Tuesday, the GfK German Consumer Climate numbers will draw interest ahead of German inflation figures on Wednesday. Softer inflation and a pullback in consumer sentiment would send bearish price signals.

Eurozone inflation, German retail sales, and German unemployment figures will need consideration (Thurs). Another fall in German retail sales and deteriorating labor market conditions would also test buyer appetite. However, Eurozone inflation will be the focal point.

French GDP, inflation, and consumer sentiment figures will likely play second fiddle to the numbers out of Germany and the Eurozone on Thursday.

Manufacturing sector PMI numbers for August end a busy week. After the dire prelim figures for August, revisions to the Flash numbers and the PMI for Italy should have more impact.

Beyond the numbers, the ECB monetary policy meeting minutes will also move the dial. The latest stats from the euro area have reduced the chance of an ECB rate hike. We expect the minutes to provide some guidance.

For the Pound:

The UK housing sector will draw interest this week. However, we don’t expect the numbers to affect the Pound.

On Friday, revisions to the flash UK manufacturing PMI will influence. However, we expect central bank chatter to have more impact. The latest round of UK economic indicators eased bets on the BoE pushing for two interest rate hikes. BoE Chief Economist Huw Pill could provide clarity at events on Thursday and Friday.

For the Loonie:

GDP numbers will drive the Loonie. Q2 figures are out on Friday. Hotter-than-expected numbers will likely test market bets on a Bank of Canada hold on interest rates.

From elsewhere, private sector PMI numbers from China will also move the dial.

Out of Asia

For the Aussie Dollar:

Retail sales will draw interest on Monday. With the RBA hitting pause on interest rate hikes, hotter-than-expected numbers would support the Aussie Dollar. However, RBA Board members must deliver hawkish chatter to shift the bearish sentiment plaguing the Australian Dollar.

Building approvals, private new CAPEX, and home loan figures will draw interest in the second half of the week. The RBA remains sensitive to housing sector data. A deterioration in housing sector conditions could cement an RBA hold on interest rates.

For the Kiwi Dollar:

The Kiwi Dollar will sit in the hands of private sector PMIs from China and market risk sentiment.

While NBS private sector PMIs from China will draw interest on Thursday, the Caixin Manufacturing PMI will be the key driver. A return to growth would support riskier assets and the Kiwi Dollar.

For the Japanese Yen:

The Japanese Yen will need monitoring this week. Economic indicators from Japan include industrial production and capital spending.

While the numbers will draw interest, the Bank of Japan (BoJ) will likely remain focused on inflation. BoJ member commentary must be hawkish to end a four-week losing streak.

Out of China

Private sector PMIs will move the dial. On Thursday, the NBS Manufacturing and Non-Manufacturing PMIs will draw interest. A more marked contraction across the manufacturing sector would weigh on riskier assets. However, the all-important Caixin Manufacturing PMI will have more impact on Friday.

Economists forecast the Caixin Manufacturing PMI to increase from 49.2 to 49.5. A return to 50.0 should support riskier assets.