Weekly Market Outlook: Fed Minutes & Powell’s Speech

The week will see a continuation of various economic reports and scheduled speeches by central bankers which will continue to keep the markets busy.

The events that stand out include the meeting minutes from the Federal Reserve and the ECB.

Fed Chairman, Jerome Powell will be speaking along with a number of other Fed members. BoE’s Carney is also slated to make an appearance this week.

In the backdrop of last week’s data, the economic indicators are painting a mixed picture.

The declines in both manufacturing and services PMI are certainly a cause for concern. But this was made up for by Friday’s jobs report. Still, investors continue to raise the odds of another rate cut from the Federal Reserve.

Data from the eurozone is sparse, save for the ECB meeting minutes. This will be the last meeting minutes under the leadership of ECB Chief, Mario Draghi.

Here’s a brief look at the key economic events coming up for the week ahead.

Fed Minutes & Speeches Could Outline Forward Guidance

The Federal Reserve cut rates twice already. The recent declines from the ISM’s index raised the prospects of further rate cuts. But still, the markets remain mixed. The Federal Reserve maintains the view that the U.S. economy is on a firm footing. Investors will get a glimpse into the policy makers’ thinking this week.

FOMC Meeting Minutes: What to Watch

The Federal Reserve’s FOMC met in September. The central bank cut rates by another quarter basis point amid some dissenting votes.

The Federal Reserve has so far maintained the view that the US economy is strong, albeit losing some momentum. Investors will be looking to the Fed meeting minutes for more insights as to how the decision to cut was reached.

Of particular interest will be the Fed’s repo operations. Fed Chair Powell also hinted that the central bank could look at organically growing its balance sheet once again.

All Eyes on September Inflation Report

The US Department of Commerce will be releasing the monthly inflation report this week. The core inflation rate has been outperforming the headline CPI, rising for the third consecutive month.

Despite this, CPI remains sluggish and stubbornly below the Fed’s 2.0% inflation target rate. Medical care among others is still one of the key drivers of price inflation. But energy prices remain weak.

The volatile goods prices which saw a strong increase in August could dissipate. Investors expect headline inflation to rise just 0.1% on the month to an annualized pace of 1.8%.

The core inflation rate is forecast to rise by 0.2%, making for a softer reading for September. Core CPI is forecast to remain steady at 2.4% on a year over year basis.

BoE & Economic Data to dictate GBP Flows

The clock ticks closer to the October 31^st deadline for the UK to leave the EU.

Despite fresh proposals being submitted, the EU remains unconvinced. Meanwhile, PM Johnson remains adamant about leaving the EU on the set deadline. But the court ruling for the parliament to block a no-deal Brexit makes it complicated.

Will the GBP continue to ignore the Brexit developments?

BoE Member Lineup for Week Ahead

Various members of the Bank of England’s monetary policy committee are set to take turns this week. Starting with BoE Governor Mark Carney, other members include Haldane and Tenreyro.

The BoE has remained on the sidelines so far, but recently there has been an increase in calls for a possible rate cut. UK economic data points to an impending recession.

UK GDP to Stay Flat in August

The UK’s Office for National Statistics (ONS) will be releasing the monthly GDP figures this week.

Economists are seeing that growth stagnated during the month. This comes on the back of a surprising 0.3% increase in July.

Besides the GDP report, industrial, manufacturing and construction output figures are also due. All three measures are forecast to post a decline or remain sluggish.

This would be consistent with the ONS’s view that the jump in July’s GDP was something not to read too seriously. But the big question is how the GBP will react in the week ahead.