This week, spanning from September 17 to September 21, 2024, features critical economic events that will shape the market dynamics for several major currencies. The spotlight will be on central banks, with the Federal Reserve (Fed), Bank of England (BoE), and Bank of Japan (BoJ) all making key monetary policy decisions. Additionally, important economic data from Canada, New Zealand, and Australia will provide further insights into the global economy’s state and direction. Here’s a breakdown of these events in chronological order.
Canadian Inflation Data (Tuesday, September 17)
On Tuesday, September 17, the Bank of Canada (BoC) will release the inflation data for August. This will be a crucial report for traders and investors as they look for clues about the BoC’s future policy direction. The BoC made already three interest rates cut by 0.25% each starting in June.
U.S. Retail Sales Data (Tuesday, September 17)
Also on Tuesday, September 17, the U.S. will release its August retail sales data, a key indicator of consumer spending and overall economic health. In July, retail sales rose 0.7% month-over-month, showing resilience in the face of higher interest rates. A strong retail sales figure would signal that the U.S. economy remains robust, supporting the case for the Federal Reserve to maintain a cautious approach to interest rate cuts.
However, a significant slowdown in retail sales could raise concerns about the strength of the U.S. economy, pushing the Fed toward a more aggressive rate cut on Wednesday, which could weaken the U.S. dollar and push equity markets higher.
New Zealand GDP Data (Wednesday, September 18)
Moving to Wednesday, September 18, New Zealand will release its Gross Domestic Product (GDP) data for Q2. The data will be a key gauge of the country’s economic health and could impact the Reserve Bank of New Zealand’s (RBNZ) future rate decisions.
U.S. Federal Reserve (Fed) Interest Rate Decision (Wednesday, September 18)
The major event of the week will be the Federal Reserve’s interest rate decision, scheduled for Wednesday, September 18. The Fed is widely expected to cut rates, but the size of the cut is the key uncertainty. Market participants are split between a 25 basis points (bps) or 50 bps rate reduction.
A 25bps cut would signal a cautious Fed, balancing the need to support growth while keeping inflation under control. This could offer mild support to U.S. equity markets, while the U.S. dollar may weaken slightly. If the Fed opts for a more aggressive 50bps cut, it would indicate greater concern about economic weakness, leading to a potential surge in risk assets like equities but a more pronounced drop in the U.S. dollar.
The Fed’s economic projections and Chair Jerome Powell’s press conference following the decision will also be critical in shaping market sentiment. Any hints about future rate cuts or adjustments in the Fed’s inflation and growth forecasts will likely have a significant impact on global markets.
Bank of England (BoE) Interest Rate Decision (Thursday, September 19)
On Thursday, September 19, the Bank of England will announce its policy decision. While no change in interest rates is expected, as the BoE is likely to maintain its 5.0% rate, the tone of the accompanying statement will be crucial. With U.K. inflation still above the central bank’s 2% target, the BoE remains in a difficult position. It needs to balance high inflation against a slowing economy, where recent indicators have pointed to weaker growth.
Governor Andrew Bailey’s press conference will provide further insight into the BoE’s thinking. If the BoE adopts a dovish tone, signaling that rate cuts are possible in the near future, the British pound could come under pressure. On the other hand, if the BoE strikes a more hawkish stance, indicating that inflation remains the primary concern, the pound could strengthen.
Australian Employment Data (Thursday, September 19)
Also on Thursday, Australia will release its August employment data, including figures for employment change and the unemployment rate. The Reserve Bank of Australia (RBA) will be closely monitoring this data to assess the health of the labor market.
Bank of Japan (BoJ) Interest Rate Decision (Friday, September 20)
Rounding off the week is the Bank of Japan’s policy decision on Friday, September 20. The BoJ is expected to maintain its borrowing costs to 0.25%. Governor Kazuo Ueda’s press conference will be closely watched for any hints about future policy adjustments.
