Week Ahead Preview 3rd of October

Investors’ eyes will be on major central banks meetings and FOMC members’ speeches this week. Markets expect the monetary policymakers to maintain their hawkish rhetoric as long as low unemployment levels allow them to keep their aggressive rate hikes to control high inflation levels. That said, signs of weakness in the unanimous stance of the Fed members appeared last week as some hinted at the need to slow down the current rate hike’s pace, and more of those signals this week could boost the market’s risk appetite sending risky assets higher.
 
The British Pound recovered from a muti-decade low against the US Dollar last week and rallied by 3% however, the storm is far from over as the bank of England has returned to quantitative easing policy (buying bonds) until October 14th 2022 to maintain financial stability, although, this would increase the double-digit inflation figure in the UK and require a series of rate hikes that could send British interest rates above 4% by the end of 2022.
 
Most of the US and Europe’s indices retreated by nearly 3% last week on risk-off sentiment triggered by the current hawkish central banks’ policies. On the other hand, the Gold closed in the green benefiting from the US dollar fall while Oil slipped on increased fears of lower demand due to expectations of a global recession hence, OPEC+ considers in this week’s meeting cutting 1 million barrels per day or 1% of global supply.

Economic data highlights

Monday 3rd of October

• CHF- Inflation Rate (SEP)
• EUR- Global Manufacturing PMI Final (SEP)
• GBP- Global/CIPS Manufacturing PMI Final (SEP)
• CAD- Global Manufacturing PMI Final (SEP)
• USD- ISM Manufacturing PMI (SEP)
• Fed George & Williams Speeches
• ZAR – ABSA Manufacturing PMI (SEP)
• ZAR – Total New Vehicle Sales (SEP)

Tuesday 4^th of October

• RBA Interest Rate Decision
• Fed Logan, Williams, Mester and Daly Speeches
• ECB President Lagarde’s Speech

 
Wednesday 5^th of October

• AUD- Global Services PMI Final (SEP)
• RBNZ Interest Rate Decision
• OPEC meeting
• EUR- Global Services PMI Final (SEP)
• USD- ADP Employment Change (SEP)
• USD- ISM Non-Manufacturing PMI (SEP)

Thursday 6^th of October

• EUR- Retail Sales (AUG)
• Fed Evans Speech 
• ECB Monetary Policy Minutes

Friday 7^thof September

• CHF- Unemployment Rate (SEP)
• EUR- Retail Sales (Germany-AUG)
• CAD- Unemployment Rate (SEP)
• USD- Non-Farm Payrolls (SEP)
• USD - Unemployment Rate (SEP)
• Fed Williams Speech

 
Central Banks Meetings
 
The Reserve Bank of Australia (RBA) is likely to hike interest rates by 50bp from 2.35% to 2.85% in the coming meeting given the higher-than-expected retail sales figures of August (0.6%) combined with stabilized unemployment rates at 3.5%. That said, this could be a dovish hike as the central bank may start to raise rates at a slower pace as inflation may decelerate later in 2023.  
 
The Reserve Bank of New Zealand may follow its Australian peer in its hawkish course and hike interest rates by 50 bp from 3.0 to 3.5% in the coming meeting to contain price pressures while attempting not to push the economy into recession. The RBNZ is expected to hike rates even further this year by another 50 bp before starts considering slowing its pace by next year.
  
Non-Farm Payroll
 
Fed officials were unanimous in their recent speeches on fighting high inflation levels, thus markets expect the central bank to keep its tight monetary policy and deliver more rate hikes in the coming months.
 
The expected non-farm payroll report will provide an updated picture of the US labour market and even if the unemployment data come in higher than expected and the average hourly range come in lower-than-expected, it is highly likely to see the Fed hiking interest rates by 75bp in November’s meeting, unless November’s CPI report reveals a big drop, in that case, a 50bp rate hike would be more likely.