The Upcoming Week: International Currencies Prepare for Impactful Economic Data Announcements

Key points:

• The direction of the Fed's interest rate trajectory will be determined by the US ISM Non-Manufacturing PMI and the Jobs Report.
• Concerns about prolonged monetary policy stances will accompany monetary policy announcements from the RBA and the RBNZ.
• The week's atmosphere will be influenced by China's private sector PMIs and updates on the US Government shutdown.  

For the Dollar:

The ISM Manufacturing PMI is set to commence a significant week for the US dollar. A more pronounced decline in the manufacturing sector could instill concerns about a substantial economic downturn. As the manufacturing sector contributes to 20% of the US GDP, investors are likely to become more responsive to weaker figures.

On Tuesday, the JOLTs Job Openings will mark the initial monthly labor market report for investors to consider. Market participants will need to evaluate whether the aggressive Fed interest rate trajectory is beginning to impact labor market conditions.

The September ADP nonfarm employment change numbers will also serve as a precursor to the US Jobs Report. While these figures will influence Fed expectations on Wednesday, the crucial ISM Non-Manufacturing PMI may carry more weight for the dollar. Given that the US services sector contributes over 75% to the economy, an unforeseen contraction could unsettle the markets.

Thursday will see attention on the weekly jobless claims prior to the US Jobs Report on Friday. Investors will need to assess the nonfarm payrolls, unemployment rate, and wage growth. The focus on inflation driven by demand could heighten the significance of wage growth.

In addition to the data, Fed Chair Powell is scheduled to speak on Monday. Furthermore, FOMC members Harker and Williams will also deliver speeches on Monday.  

For the EUR:

Monday will place emphasis on the manufacturing sector. Unless there are notable adjustments to the German PMI, the Italian and Eurozone manufacturing PMIs will carry greater significance for the EUR.

Despite the manufacturing sector contributing less than 30% to the GDP, an improvement in trade terms could amplify the manufacturing sector's impact on the euro area economy.

The more pivotal services sector PMI on Wednesday will sway investor sentiment regarding the Eurozone economy. Revisions to the Eurozone PMI will wield a greater influence on investor sentiment.

The EUR will wrap up a hectic week with German trade on Thursday and factory orders on Friday.

In addition to the data, investors should keep an eye on the ECB calendar for ECB commentary throughout the week. ECB Chief Economist Philip Lane is scheduled to speak on Tuesday and Thursday, while ECB President Christine Lagarde is slated to speak on Wednesday.  

For the Pound:

The Pound could face a volatile week as the focus shifts to the private sector.

Investor attention will be captured by the finalized manufacturing and services PMIs on Monday and Wednesday.

Nevertheless, the Pound will be more significantly influenced by revisions to the services PMI. Downward revisions could trigger another round of Pound selling.

Housing sector figures also require scrutiny, as house price reports are due on Monday and Friday. A substantial decrease in house prices would indicate a weakening housing sector, which in turn would impact consumer confidence and spending.

In addition to the data, it's important to consider speeches from Bank of England members.  

Out of Asia

For the Aussie Dollar:

The Australian Dollar’s fate will be determined by the RBA's decision on Tuesday. Although softer retail sales figures have been reported, recent inflation data may compel the RBA to uphold a hawkish policy stance.

Trade data on Thursday and finalized retail sales on Friday will also warrant attention in the latter part of the week.

The RBA will come under scrutiny again, with the release of the Financial Stability Review on Friday. The impact of an elevated interest rate environment on households has been notable. Growing apprehensions about the housing sector and increasing default risks are likely to have an effect on the Australian dollar.

Private consumption contributes significantly (50%) to the economy. Escalating defaults on personal loans and mortgages would have an adverse effect on consumer confidence and spending.

Additionally, the private sector PMI figures from China will play a pivotal role in setting the overall tone.  

For the Kiwi Dollar:

The forthcoming RBNZ interest rate pronouncement will influence the trajectory of the New Zealand Dollar in the short run. Despite market expectations of the RBNZ keeping the cash rate at 5.50%, it's essential to take the Rate Statement into account.

In addition, the private sector PMIs from China will establish the mood before the release of business confidence figures on Tuesday. An increase in business confidence is expected to potentially provide price support before the RBNZ decision.  

For the Japanese Yen:

The Japanese Yen's week will commence with the Tankan survey-based data for the third quarter.

In the middle of the week, it's essential to take into account the finalized services PMI figures for September. Revisions to the Flash PMI will affect investor sentiment toward the Japanese economy, with the services sector contributing over 65% to the GDP.

Friday will see a focus on the significant household spending numbers for August. Bank of Japan Governor Ueda has underscored the importance of wage growth and increased consumption as prerequisites for a potential policy shift away from negative interest rates. Another unforeseen decline in household spending would likely keep the BoJ in its current ultra-loose monetary policy stance. The Tankan survey-based data for the third quarter will commence the week for the Japanese Yen.

In the middle of the week, it's crucial to take into account the finalized services PMI figures for September. Revisions to the Flash PMI will impact investor sentiment regarding the Japanese economy, with the services sector contributing over 65% to the GDP.

Friday will see the release of the significant household spending statistics for August. Bank of Japan Governor Ueda has emphasized the necessity of wage growth and increased consumption as prerequisites for a potential deviation from negative interest rates. Another unforeseen decline in household spending would likely keep the BoJ adhering to its ultra-loose monetary policy approach.  

Out of China

The National Day holidays will lead to the closure of the Chinese markets for the entire week. Nonetheless, the Caixin services and manufacturing PMIs will impact the demand for the commodity currencies at the start of the week.

Economists predict an increase in the Caixin Manufacturing PMI from 51.0 to 51.2, and a rise in the services PMI from 51.8 to 52.0. The report is scheduled for release on Sunday.