The week ahead in FX: 9-13 September 2019

DM

Administrator
Staff member
The main event of the coming week will be the European Central Bank's meeting on Thursday, 12 September. Mario Draghi is widely expected to announce a 10-15 basis point rate cut and perhaps even a renewed bond buying programme. These actions are far from certain, however, making Thursday a risky day for traders. Net short positions in euro futures on the CME increased by 10,000 contracts, which is in line with last week's break below $1.10 in the EUR/USD exchange rate. EURUSD has since recovered to 1.1025. If the ECB disappoints market expectations, we will likely see a pronounced move higher. Even if Draghi delivers as expected, I see only limited room for more euro weakness. Investors will probably wait for the Federal Reserve, which will announce its next FOMC decision on 18 September, before entering into new EUR short positions against the US dollar.

Next week is also packed with economic data releases:

On Monday, Japan will begin by posting GDP figures for the second quarter as well as balance of payments numbers for July. It is followed by Germany reporting its trade balance as of July. Sentix will publish its latest investor confidence data for the euro area. Then, the United Kingdom will post its monthly GDP figures and changes in both industrial and manufacturing production for July. Industrial production is expected to have decreased by more than 1% YoY. Finally, Russia will also publich Q2 GDP YoY changes.

Tuesday, it is France's turn to report its industrial production numbers for July, which are expected to have increased by 0.4% YoY. Italy will report industrial production, too. The UK will later publish changes in jobless claims for August and the ILO unemployment rate. In the afternoon, Canada is set to report housing starts in August.

Wednesday is all about the United States with the release of August PPIs and the monthly change in wholesale inventories in July.

Thursday morning, Japan reports its monthly PPI for August. Germany then publishes August CPI data (a 1.4% increase is expected YoY), as will France (1.1% expected). In the afternoon all eyes will be on the ECB, especially its deposit facility rate. While a cut to -0.5% is currently priced in the markets, the ECB might delay the rate cut or announce exemptions for certain banks. While Draghi speaks, the U.S. will publish CPI figures for August, and initial jobless claims as of 7 September.

Friday is a bit lighter on data releases. Japan's MoM industrial production for July could move markets a bit, as might retail sales data from the U.S. in the afternoon.
 

DM

Administrator
Staff member
I forgot to mention that the Central Bank of the Republic of Turkey (TCMB) will also announce its next rate decision on Thursday, 12 September. It reduced the one-week repo rate by 425 basis points to 19.75% in July. The median estimate is a further 275bp cut to 17%.
 
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