Market Outlook for the Week of 25 - 29 September

Following a bustling week with significant Central Bank decisions in the limelight, the upcoming week holds the potential for a quieter economic events calendar. The FX market may be influenced by month-end rebalancing. Highlights for Tuesday include Japan's BoJ Core CPI y/y data and the release of CB Consumer Confidence, New Home Sales, and the Richmond Manufacturing Index in the United States. On Wednesday, key events include the Monetary Policy Meeting Minutes in Japan, Australia's CPI y/y, and in the United States, the Core Durable Goods Orders and Durable Goods Orders m/m figures. As Thursday unfolds, attention will turn towards eurozone CPI data and in the United States, the release of final GDP q/q, Unemployment Claims, and Pending Home Sales m/m data.. The week concludes with Japan's Tokyo Core CPI y/y and unemployment rate on Friday. In the United States, the spotlight will be on the Core PCE Price Index m/m, Revised UoM Consumer Sentiment, and Revised UoM Inflation Expectations. Additionally, throughout the week, various Federal Reserve members, including Fed Chair Powell, are scheduled to deliver speeches. The consensus for the BoJ Core CPI y/y is for a drop from 3.3% to 3.2%. However, analysts from ING believe that core inflation without fresh food and energy might run hot in September fueled by private service prices. In the U.S. the CB Consumer Confidence is likely to decrease from 106.1 to 105.5. New Home Sales are expected to drop from 714K to 699K due to pressure from higher mortgage rates even though until now new home sales have been pretty resilient. The NAHB housing market index has decreased for the past two months reflecting some stress in the sector and there is a correlation between the drop in builder confidence and rises in mortgage rates according to analysts from Wells Fargo. This is expected to be reflected in this week's data. The Australian CPI y/y data is expected to run hot and to rise from 4.9% to 5.2%. One of the main reasons for this is the soaring petrol prices which was reflected in some service prices. There are also some expectations of increases in food prices, alcohol and tobacco. In the U.S., the consensus for the Core Durable Goods Orders m/m is for a drop from 0.4% to 0.1% and Durable Goods Orders are expected to see a further 0.5% decline following a more serious 5.2% drop in July. Overall, the data for durable goods orders has been quite volatile lately with one of the main reasons being aircraft orders which varied significantly from month to month. A drop is expected in both eurozone headline and core inflation. The economy is facing headwinds and it's expected to continue to slow down, but for the moment the focus will be on inflation data especially with the latest rise in oil prices, which analysts from ING argue will have a limiting impact on energy inflation. The U.S. Personal Income and Spending data will be important to watch this week. Analysts from Wells Fargo expect the PCE deflator to increase 0.4% in August and the Core PCE deflator to also rise by 0.2%. Their forecast is for both personal income and spending to increase by 0.5%, continuing a 12-month long growth in personal consumption expenditures. However, the real PCE will see pressure in the coming months due to the loosening labor market, underwhelming inflation improvement and resumption of student loan payments. This article was written by Gina Constantin.

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