Market Outlook for the Week of 23 – 27 October

<p dir="ltr">The week will start slow with nothing significant in the calendar for Monday. On Tuesday, Japan will publish the BoJ Core CPI y/y; while the U.K. will get the claimant count change and unemployment rate. For the eurozone, the U.S. and U.K. we have the Flash Manufacturing PMI and Flash Services PMI.</p><p dir="ltr">Australia will publish the CPI data on Wednesday and Canada will have its monetary policy announcement, including the overnight rate. In the U.S. the new home sales print is expected and Fed Chair Powell will speak at the Moynihan Lecture in Social Science and Public Policy, in Washington DC.</p><p dir="ltr">Thursday will bring the ECB monetary policy statement, the main refinancing rate and press conference. The U.S. will get the unemployment claims; core durable goods orders m/m; durable goods orders m/m and pending home sales.</p><p dir="ltr">The Tokyo Core CPI y/y is expected Friday; and the U.S. will see the Core PCE Price Index m/m; Personal Income m/m; Personal Spending m/m; Revised UoM Consumer Sentiment and Revised UoM Inflation Expectations.</p><p dir="ltr">On Tuesday we'll get the job market figures for the U.K. and it's very possible to see an increase in the unemployment rate. Since the latest economic data was not too hot, the BoE will likely opt to keep the monetary policy unchanged at the next meeting. According to past unemployment survey responses, some deterioration is likely in the jobs market in the coming months, but there's a possibility the data is not very good due to a low response rate. </p><p dir="ltr">The Manufacturing PMI data for the eurozone is likely to rise to 43.7 from prior 43.4 and services to drop from 48.7 to 48.6. However, it's possible data for the manufacturing sector to drop in the near future, adding to economic uncertainty and raising the odds for a recession in the euro area. For the U.K., a rise is expected in the Manufacturing PMI data, from 49.3 to 49.5, and in the flash services PMI from 49.3 to 49.4.</p><p dir="ltr">This week's CPI data in Australia is eagerly expected as it can provide clues about what might happen at the next RBA meeting on November 7th. For the y/y data expectations are that it won't rise and will remain sticky at 5.2%, according to ING. Analysts believe the RBA will hike rates one more time until the end of the year, but it's not clear yet if the hike will be at the November meeting or at the December one. It's possible the Bank will wait until December to avoid the pressure of hiking twice if the CPI data after the November meeting is disappointing. Inflation is still a very concerning matter in Australia.</p><p dir="ltr">At this week's meeting, the BoC is most likely to keep the overnight rate unchanged but will keep the door open for additional rate hikes if necessary. The inflation data has cooled down lately in Canada, but the jobs market managed to remain robust. ING pointed out that economic activity contracted in Q2 and flatlined in July, this being an argument that rate hikes have probably peaked.</p><p dir="ltr">The ECB is likely to maintain its monetary policy unchanged at this week's meeting, as some analysts argue the Bank reached its peak on rate hikes, analysts at ING noted that inflation is becoming more benign and the economy is weakening rapidly. They also point out that elevated prices for oil and a tight labor market present heightened risks for inflation, so it's important to see if the ECB gives any hints about another rate hike in December. </p><p dir="ltr">Tokyo's CPI inflation data is most likely to slow down, the consensus being 2.7% for the y/y data. ING analysts argue the recent pick-up in global commodity prices and the weaker yen could contribute to the upside pressure.</p><p dir="ltr">In the U.S., the consensus for personal income is to increase to 0.4% and for personal spending to rise to 0.5%. While consumer spending seems to be resilient despite tougher credit conditions, disposable income has decreased for the past three months suggesting less excess liquidity. If the labor market weakens in the future, wages will also soften, putting pressure on consumer spending.</p><p dir="ltr">This article was written by Gina Constantin.</p>

This article was written by FL Contributors at www.forexlive.com.