General, Forex

Week Ahead: Eyes on ECB forward guidance

George Walker, Friday, 4 September 2020

MKT-6930_WA-ECB_blog

The eurozone has been one of the most affected areas by coronavirus. Even pre-pandemic, it seemed a recession beckoned, but it’s now up to policymakers to look forward and try to prevent the deterioration of the eurozone economy in the long term. But with interest rates at rock bottom, will the ECB once again turn to QE as the stimulus measure of choice? Before the big decision, there’s plenty of other macro data releases to watch out for.

Here’s your market preview for the week ahead.

Due to the United States being off for Labor Day, we’re set for a relatively quiet start to the trading week on the macro data front with only Import and Export data from China overnight and Industrial Production data from Germany ahead of the European markets open.

Tuesday could be an interesting day for the EURJPY pairing as we receive Gross Domestic Product figures from both economies. Japan releases its numbers overnight and GDP from the eurozone hits the wires at 10am. The euro traded at its highest level since March last week against the yen so traders will be weighing up which economy is fairing best ahead of taking positions.

Consumer Price Index inflation data as well as Producer Price Index are released from China in the early hours of Wednesday morning ahead of the Unemployment Rate from Switzerland as the morning progresses.

BoC interest rate decision

The first central bank interest rate decision of the week comes during the afternoon on Wednesday from the Bank of Canada. The BoC has dramatically cut their interest rates over the past number of weeks from 1.75% down to 0.25%. Previous comments from the BoC indicate that they are prepared to do more to boost the economy if needed although no change is expected to the benchmark interest rate at this meeting. Will the accompanying statement provide clarity on forward guidance?

German Consumer Price Index data precedes GDP data from the UK during Thursday morning. UK GDP figures have been lackluster to say the least of late and these updates are carefully monitored by policymakers so could have a large impact on the value of the British pound.

Eyes on ECB forward guidance

Thursday’s headline event will be the Interest Rate Decision from the European Central Bank and following Policy statement and Press Conference. European economies have been among the worst affected by the coronavirus and have forced the Central Bank to take measures to support the eurozone. The dilemma they face is their limited options as interest rates are already at rock bottom, so Quantitative Easing (QE) has so far been their tool of choice. 

Last time out the ECB kept their interest rates unchanged but did mention it was ready to increase its stimulus measures as the eurozone faces a deep and potentially lengthy economic crisis. Prior to the pandemic taking hold, the eurozone was already on the brink of a recession and for obvious reasons, these fears could now materialize. The press conference at 13:30 BST is where traders and investors will be focused to see what the plans are going forward to limit the damage to the economy and attempt to get back on the right track.

Initial and Continuing jobless claims from the United States round off what could be an eventful Thursday of trading.

Increased emphasis on US inflation

The final trading day of the week is a relatively quiet one. Industrial and Manufacturing Production figures are released an hour ahead of the markets opening in Europe. The main focus could be on the US CPI data in the early afternoon. Recent commentary from the Chairman of the Federal Reserve Jerome Powell has put an unexpected emphasis on inflation when making decisions on monetary policy going forward and Consumer Price Index (CPI) is a major gauge of this so we could see volatility in the USD as the numbers come out.

With equity markets trading back near record highs once again in the US and many currencies at key support or resistance levels, traders will need to be aware of the times and dates of these economic updates in case we see exaggerated movements.

All times indicated are BST.


ECONOMIC CALENDAR (all times are BST)

Monday, 7 September

US Labour Day
CAD Labour Day
02:00 CNY Imports
02:00 CNY Exports
02:00 CNY Trade Balance
06:00 JPY Coincident Index Preliminary
06:00 JPY Leading Economic Index Preliminary
07:00 GER Industrial Production
09:30 EUR Sentix Investor Confidence

UK Company Announcements:

AB Foods

US Company Announcements:

N/A

Tuesday, 8 September

00:30 JPY Labour Cash Earnings
00:30 JPY Overall Household Spending
00:50 JPY Current Account
00:50 JPY Bank Lending
00:50 JPY Gross Domestic Product
00:50 JPY Gross Domestic Product Deflator
00:50 JPY Gross Domestic Product Annualized
00:50 JPY Trade Balance – BOP Basis
02:30 AUD National Australia Bank’s Business Confidence
02:30 AUD National Australia Bank’s Business Conditions
07:00 GER Imports
07:00 GER Exports
07:00 GER Trade Balance
10:00 EUR Gross Domestic Product
10:00 EUR Employment Change
11:00 USD NFIB Business Optimism Index
21:30 USD API Weekly Crude Oil Stocks

UK Company Announcements:

Fevertree
Ashtead Group

US Company Announcements:

N/A

Wednesday, 9 September

01:30 AUD Westpac Consumer Confidence
02:00 NZD ANZ Business Confidence
02:00 NZD ANZ Activity Outlook
02:30 CNY Consumer Price Index
02:30 CNY Producer Price Index
02:30 AUD Home Loans
02:30 AUD Investment Lending for Homes
06:45 CHF Unemployment Rate
13:15 CAD Housing Starts
13:55 USD Redbook Index
15:00 CAD BoC Interest Rate Decision
15:00 CAD BoC Rate Statement

UK Company Announcements:

Computacenter
Tullow Oil

US Company Announcements:

N/A

Thursday, 10 September

02:00 AUD Consumer Inflation Expectations
07:00 GER Consumer Price Index
07:00 GER Harmonized Index of Consumer Prices
09:30 GBP Gross Domestic Product
09:30 GBP Goods Trade Balance
09:30 GBP Total Trade Balance
12:45 EUR ECB Interest Rate Decision
12:45 EUR ECB Deposit Rate Decision
13:30 EUR ECB Monetary Policy Statement & Press Conference
13:30 USD Producer Price Index
13:30 USD Producer Price Index ex Food & Energy
13:30 USD Initial Jobless Claims
13:30 USD Continuing Jobless Claims
15:30 EIA Natural Gas Storage Change
16:00 USD EIA Crude Oil Stocks Change
23:30 NZD Business NZ PMI

UK Company Announcements:

Go-Ahead Group

US Company Announcements:

Kroger Company
Chewy Inc

Friday, 11 September

00:50 JPY Producer Price Index
07:00 GBP Industrial Production
07:00 GBP Manufacturing Production
09:30 GBP Consumer Inflation Expectations
13:30 USD Consumer Price Index
13:30 USD Consumer Price Index Core
13:30 USD Consumer Price Index ex Food & Energy
18:00 USD Baker Hughes US Oil Rig Count
19:00 USD Monthly Budget Statement

UK Company Announcements:

Ashmore

US Company Announcements:

N/A

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