The upcoming week: Anticipating PMI findings, Central Bank determinations, and looming inflation

The world economy stays susceptible to crucial signals such as services PMIs, employment updates, and central bank measures, while investors manage market uncertainties.

Highlights

• Key focus on Tuesday will be the preliminary October private sector PMIs, influencing market sentiment.

• The ECB interest rate decision and subsequent press conference on Thursday will hold significance for the EUR/USD exchange rate.

• Friday will bring a conclusion to the eventful week with attention on US inflation, personal spending, and consumer sentiment.

For the US Dollar:

1. On Tuesday, initial focus will be on the early October private sector PMI data, providing insight into the Q4 economy performance.

2. A pivotal area of interest will be the service sector activity, which significantly impacts the US economy. Alongside the headline PMI, investors should analyze sub-components such as prices, employment, and new orders. Analysts predict a potential decline in the Services PMI from 50.1 to 49.8.

3. Thursday's attention will turn to Q3 GDP numbers, influencing investor sentiments towards the US dollar. Strong Services PMI and GDP figures could drive expectations of a Fed interest rate hike. However, the significance of jobless claims cannot be overlooked, as labor market conditions remain pivotal for Fed decisions.

4. Friday will see the release of inflation, personal spending, and consumer sentiment data, potentially influencing demand for the US dollar, particularly if inflation remains persistent and spending and sentiment figures are positive.

For the Euro:

1. On Tuesday, the EUR/USD will be influenced by consumer sentiment figures from Germany and preliminary private sector PMIs for the Eurozone. Notably, the German, French, and Eurozone Services PMI are expected to have a significant impact on the Euro.

2. A decline in service sector activity could reinforce expectations of a recession in the Eurozone. With the services sector contributing over 70% to the Eurozone economy, a potential drop in the Eurozone Services PMI from 48.7 to 48.6 is anticipated.

3. Wednesday will bring attention to German business sentiment figures, with their influence likely hinging on the PMI data. On Friday, French GDP numbers for Q3 will also play a role in shaping sentiments towards the EUR/USD pair.

4. Thursday's spotlight will be on the ECB interest rate decision and press conference, with speculation suggesting that the ECB will maintain interest rates at 4.5%. The market will closely monitor ECB President Lagarde's guidance on EUR/USD.

For the Pound:

1. The UK labor market and private sector will take center stage, potentially leading to volatility in Pound trading on Tuesday.

2. The delayed labor market overview report will draw early investor interest, especially following lower-than-expected wage growth. The claimant counts and UK unemployment rate should also be considered, as an unexpected increase in claims and unemployment rate could exert pressure on the Pound.

3. While private sector PMI numbers for October also warrant attention, the Services Sector PMI, accounting for over 70% of the UK economy, is especially significant. A projected rise in the Services PMI from 49.3 to 49.8 is anticipated.

4. Beyond the data, the speech by BoE Monetary Policy Committee member Sir Jon Cunliffe on Thursday should be noted.

For the Canadian Dollar:

1. The Bank of Canada's decision on Wednesday to potentially raise interest rates to 5.25% will impact demand for the Canadian dollar. The accompanying statements and press conference will be closely watched, as a dovish rate hike may dampen investor appetite for the Loonie.

2. Market risk sentiment and its influence on crude oil prices are additional factors that could sway the Loonie.

For the Australian Dollar:

1. Tuesday's focus will be on the private sector PMIs and RBA, particularly following the unexpectedly hawkish RBA Meeting Minutes. RBA Assistant Governor Michelle Bullock's speech will provide further insight. Weaker-than-expected private sector PMIs for October may counter hawkish RBA sentiment.

2. Q3 inflation figures will likely hold more sway over the Australian dollar, with economists forecasting a softening in the annual inflation rate from 6.00% to 5.30%. A higher-than-expected inflation rate would fuel expectations of an RBA rate hike.

3. Friday's producer prices for Q3 will also be significant, potentially indicating robust demand-driven inflationary pressures.

For the Japanese Yen:

1. Preliminary private sector PMIs for October will be paramount on Tuesday, with the Services PMI carrying greater influence. The services sector's substantial contribution to the Japanese economy makes the forecasted decline in Services PMI from 53.8 to 52.9 noteworthy.

2. Friday will bring attention to inflation once again, with hotter-than-expected figures potentially pressuring the Bank of Japan to exit negative rates. Expectations also revolve around further modifications to the Yield Curve Control policy.

3. Economists expect the annual inflation rate for Tokyo to soften from 2.5% to 2.3% in October, with national inflation easing from 3.2% to 3.0% in September. Core inflation has dipped below 3.0% for the first time since August 2022.

For China:

1. Industrial profits will take the spotlight on Friday, with focus on signs of an improving macroeconomic environment in China. A less pronounced decline in industrial profits would support the notion that stimulus measures are yielding results.

2. Economists anticipate a 9.0% decline in industrial profits from January to September compared with the same period one year earlier, following an 11.7% decrease in August.