Key Events: Central Bank Speakers Take to the Stage

Key Events

G10

In the US, the key data point is:

1. Existing/new home sales – Wednesday/Thursday. Consensus expects roughly unchanged numbers from August, which would align with a sluggish residential investment recovery.

The Eurozone and UK has a quiet week for hard data but numerous central bank speakers and survey results:

1. Preliminary PMIs – Thursday. EZ PMIs are expected to tick up marginally. Employment expectations and wage growth matter more than headline. Given the dovish shift in ECB comments and consequent market moves, any suggestion of survey weakness fading could be key.
2. UK GfK Consumer confidence survey – Friday. The metric has been volatile recently and dropped sharply at the last outturn. The UK consumer remains under significant pressure, but hawks will be concerned about signs of a consumer rebound.
3. German IFO business survey – Friday. Recent results have been dire, in line with growing concerns of slowdown in the EZ’s largest economy.
4. ECB’s consumer expectations survey – Friday. Attention will be on inflation expectations continuing to re-anchor and the broader views on the economy.

Elsewhere in G10:

1. Tokyo CPI – Friday. We get an early look at the October’s services inflation data. Ueda has hinted that the BoJ are paying close attention to this given the annual price setting this month.

EM

1. South Africa inflation – Wednesday. Disinflation to continue with lower petrol prices and a favourable base effect.
2. Singapore CPI – Wednesday. Headline CPI is set to drop below 2% YoY this month. MAS prefers to keep the core measure at 1-2%. And while the YoY measure may remain above 2% this month on base effects, the 3mma of MoM annualized is now running at 0.5% – well below MAS’s preferred range. More confirmation of this will cement our expectation of policy easing in January.
3. China LPR cut – Monday. LPR is bank benchmark rate and follows the 7-day reverse repo rate. LPR is set to fall 20bps following PBoC’s cut on 27 September. We expect banks to reduce the one-year LPR, the benchmark for commercial loans, to 3.15% from 3.35%. We also see them cutting the five-year LPR, the reference rate for mortgages, by 20 bps to 3.65%.

Central Banks in Action

1. Fed Beige book – Wednesday. Unlikely to be a market moving event, but it will mark the beginning of the FOMC meeting cycle, with the pre-meeting blackout starting on 26 October.
2. BoC to cut by 50bp – Wednesday. We think last week’s inflation data and weak BoC survey will provide enough impetus for a jumbo cut. Growth remains stubbornly below the BoC’s Q3 forecast of 3%.
3. NBH on hold – Tuesday. EUR/HUF close to 400 rules out another rate cut this month.
4. A broad array of ECB speakers throughout the week: Villeroy, Rehn, Lagarde, Panetta, Holzmann (Tuesday); Cipollone, Escriva, Knot, Centeno (Wednesday); Lane (Thursday). Expect continued dovishness in the comments.
5. Several BoE speakers: Breeden, Greene, Bailey (Tuesday); Bailey (Wednesday); Mann (Thursday). It will be interesting to hear how the more neutral voices (Bailey and Breeden) take the recent misses in inflation, as well as the mixed labour market data.

Markets to Watch

• EUR/GBP has tumbled towards 0.83. Continued GBP weakness could mean a bounce from here.
• 12mth ahead pricing for ECB rate has fallen sharply to below 1.7% (lower than pre-NFP). Given the risks to the outlook, we would start to see value fading this move given the risk of an inflation pick-up into YE/Q1.

.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)