Key Events: Global Cutting Cycle Continues

Key Events

G10

In the US, there main data are:

1. PCE, personal income and spending – Friday. No market-moving surprise likely; Powell already told us in the presser he expects 2.7% for core PCE. Personal income and consumption are likely to continue to show robust income growth and consumption underpinned by a low savings rate.
2. S&P manufacturing and services PMIs – Monday. Consensus expects sideway moves; I agree. For market impact, see the Event Monitor.

Elsewhere in G10:

1. Australia CPI – CPI is expected to increase just +2.7%, down from +3.5% in July. This month will be riddled (again) by more rebates and so volatility against expectations should be expected.
2. Switzerland UBS Survey – Wednesday. A volatile release that points to comfortable Swiss growth. We are watching for worsening export expectations, which would add pressure on the SNB.

EM

1. Singapore CPI – Monday. This is the last CPI print before the MAS October policy review. Headline may fall to 2% YoY and core should be softer too, allowing MAS to reduce the slope at the October meeting.

Central Banks in Action

1. Fed Powell, Williams speaking – Thursday. There will be no Q&As, and the speeches for the opening of the NY Fed annual Treasury market conference are unlikely to discuss monetary policy. The next Powell economic speech with Q&A will be on 30 September.
2. SNB 25bp cut – Thursday. Swiss inflation remains below forecast with core inflationary pressures still weak. Dovish surprises could come via attitudes for FX, neutral rate hints, or any worry about too-weak deflation.
3. Another stubborn RBA pause – Tuesday. All expect the cash rate to remain at 4.35%, despite sluggish national account data. It will take sharply weaker data to shift the RBA to cutting this year.
4. NBH cut finely balanced – Tuesday. EUR/HUF back below 395, CPI within the tolerance band, and cuts from the Fed, ECB should just be enough for a rate cut.
5. PBoC MLF – Wednesday. PBoC left the 7-day repo unchanged this week, and this rather than MLF is now guided to be main policy rate. Thus MLF next week should be non-event.
6. CNB cuts to continue – Wednesday. Inflation close to target, wage growth below forecasts and recent FX strength point to another 25bp rate cut.
7. Banxico to cut 25bps – Thursday. We expect another split decision (25bp cut vs hold). Inflation falling in line with Banxico forecast and larger cut from Fed supports further cuts, while weak MXN and capital flows limit prospects of faster easing.

Markets to Watch

• USD/BRL. We like this lower, targeting 5.20, but 5.40 is a key support level. Overcoming this is necessary to break the recent trading range and get momentum going.
• USD/CNH. CNH diverged from JPY this week as PBoC left rates unchanged and BoJ was dovish. This was a rare instance of CNH being stronger due to China factors rather than USD factors. We expect a move to 6.90-7.0 and expect a break below 7.0 to generate some forex headlines.

(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.)