This week, the Reserve Bank of Australia and the National Bank of Poland will decide on interest rates. In addition, there will be many interesting PMI and ISM publications, as well as inflation data for both the euro area and Poland. It seems that investors will be looking for whether the worst is behind us or if the slowdown is getting even worse.
While the problems of the European and German economy are something normal, to which we have got used to, that the situation is getting worse, and Germany may even fall into recession, the American economy was characterized by good condition. Nevertheless, low unemployment, wage increases and high consumer confidence are not all. There are many indications that the US manufacturing sector, like the European one, is in a recession, employment rates are falling and investment spending plans are being reduced. Meanwhile, the Fed, according to its latest projections, is not going to cut interest rates further and indicates that the recent cuts are just a correction in the cycle.
Further data, such as the ISM manufacturing report, which will be published on Tuesday, October 1 at 16:00, and the ISM report for services on Thursday, October 3 at 16:00 may not only affect the US dollar, it may still be part of component for subsequent central bank decisions. Of course, it is also impossible to forget about the data from the US labor market, which will be published on Friday, October 4 at 14:30. The unemployment rate or non-farm payrolls are data that attract the attention of investors and may affect the USD.
Meanwhile, a series of PMI publications for the service sector will appear in Europe (Thursday, October 3). It should be remembered that in September the PMI showed a clear weakening of activity in the services sector, increasing concerns that the downturn in manufacturing will start to spread to the entire economy. In addition, it is worth considering the inflation reading on Tuesday, October 1 at 11:00. It seems that for now there is no reason to expect a sharp rise in prices and inflation in the eurozone will be at 1 percent.
On the other hand, in Poland, it is estimated that in September annual inflation was 2.8 percent, so it will probably not affect the decision of the Monetary Policy Council regarding interest rates. The decision will be published on Wednesday, October 2. The press conference after the decision will take place at 16:00. Therefore, the zloty may be influenced by external factors, including the judgment of the CJEU on franc loans, which will take place on Thursday, October 3.
It is also worth paying attention to the Australian dollar, which is waiting for the RBA's decision on interest rates. It will be announced on Tuesday, October 1 at 06:30. The market expects the RBA to cut its main interest rate from 1 to 0.75 percent. Looking at the valuation of options on the currency options market, this decision may entail increased volatility on the AUD/USD pair, whose exchange rate has been close to the lowest levels since 2009.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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