Week’s main events (September 08 – September 12)

Not much news is expected on Monday. The main event will take place during the Asian session. In Japan, the final GDP data will be published. The preliminary estimate for Q2 showed a 0.3% quarter-over-quarter (q/q) increase, above expectations; the second/revised estimate may only be slightly adjusted. A better-than-expected update will support the JPY and the Nikkei (JP225) index due to growth momentum; a weaker/downward revision will have a negative impact on the JPY. In China, it is worth paying attention to trade data, exports are expected to slow to 5% y/y in August, which could reduce risk appetite for industrial metals and the yuan. Strong data will support the CNY and the Hong Kong Hang Seng (HK50).

On Tuesday, traders should focus on only two key events: Australia’s NAB Business Confidence and Mexico’s inflation data. In Australia, business sentiment remains a key factor in the RBA’s trajectory. A better business mood will support the AUD (which is also sensitive to commodities). In Mexico, fresh inflation data will set the tone for the Bank of Mexico. Increasing inflationary pressure will support the Mexican peso (MXN), while data below forecasts will set a softer tone for Banxico, which is potentially negative for the MXN.

Market volatility will increase on Wednesday. China will release its CPI and PPI inflation data. The consensus expects the CPI to be in negative territory (around -0.2% y/y) and a deep deflationary PPI (around -2.9% y/y). Such data will likely put pressure on the CNY but support gold. If the data indicate a decrease in deflation, risk appetite in Asia is likely to increase.

Norway will publish inflation data. The July CPI was 3.3% y/y, the August figure is expected to be 3.6% y/y. This would signal the Norges Bank to tighten policy further, which is positive for the NOK. The US will release producer inflation data, which is considered a leading indicator of consumer inflation. The July PPI accelerated to 3.3% y/y, while the August figure is expected to be at 3.6% y/y. It will also be important to assess the core reading. The higher the PPI, the stronger the USD, which, in turn, will put pressure on gold and indices, especially the Nasdaq (US100).

Thursday is expected to be a busy day. In New Zealand, it is worth paying attention to the speech by the newly appointed head of the RBNZ, who may provide signals regarding the central bank’s rate trajectory. In the Eurozone, the ECB’s decision is expected. The consensus anticipates a pause, keeping the deposit rate at 2.15%. The market will also be watching Lagarde’s rhetoric on inflation: a “hawkish” tone or upwardly revised forecasts will support the EUR.

In contrast, softer rhetoric would weaken the EUR but support stock indices. In the US, traders will focus on the CPI data. A moderate increase in consumer inflation is expected, which could slightly alter expectations for a Fed rate cut in September. If the data comes in above expectations, it will positively impact the USD but put pressure on US indices and gold. Conversely, if inflation unexpectedly declines, the USD will weaken under pressure, while gold will get additional fuel for further growth.

On Friday, a large package of economic data will be released for the UK, with the main report being the GDP data. Last month’s GDP showed a 0.4% month-over-month (m/m) increase, while a weaker reading of 0.1% m/m is expected for August. If the economic slowdown deepens, it will put pressure on the GBP. A stronger-than-expected GDP figure will provide support for the GBP. During the US session, traders should not miss the Michigan Sentiment data, as it is important for gauging consumer inflation expectations. Higher sentiment will likely provide support for the USD.