Week Ahead: It’s all about the FOMC and the BOE – Action Forex | Jewelry Dukan

The focus for markets this week will be Wednesday’s FOMC meeting and Thursday’s BOE meeting. Both central banks are expecting high interest rates.

Queen Elizabeth II’s funeral will take place on Monday. As a result, the UK is on a public holiday and UK markets are closed. The FOMC will meet on Wednesday to decide whether the committee should hike interest rates in the US by 75 basis points or 100 basis points. Although 75 basis points is expected, the stronger than expected CPI data out of the US over the past few weeks has raised some eyebrows among Fed watchers. Additionally, the BOE will meet on Thursday to decide how much to hike rates? Originally a 75 basis point rise was expected, but over the past month expectations have dropped to a 50 basis point rise. Also note that the FTSE reshuffle will take place this week. It was supposed to take place on Monday but was postponed to Tuesday because of the public holiday.

Bank of England

The Bank of England rate decision meeting was due to take place last week. However, due to the death of Queen Elizabeth, the meeting has been postponed to this Thursday. The BOE hiked rates by 50 basis points at its August meeting to bring the policy rate to 1.75%. At the time, the BOE forecast that inflation could soar as high as 13.3% in October and that it will remain elevated for much of 2023. In addition, the central bank expected to enter a recession in the fourth quarter of 2022. Markets immediately moved on price in a 75p rate hike at the September meeting. However, last week the UK released CPI data showing that inflation fell to 9.9% yoy in August from 10.1% yoy in July. Additionally, with the recent cap on energy prices, many economists now expect October inflation to be below the estimated 13.3%. The BOE will provide an update this week. Regarding the economy, retail sales slowed significantly in August. Headlines fell from +0.4% in July to -1.6% in August. The expectation was -0.5%. The ex-fuel pressure went down by the same amount. Markets are now trending for a 50 basis point hike in the BOE this week.

federal reserve

THE FOMC will meet for its September rate decision meeting on Wednesday this week. The FOMC is expected to hike rates by 75 basis points. Last week’s CPI read was 8.3% yoy versus 8.1% yoy and a previous reading of 8.5% yoy. Although the numbers came in better than expected, it was the core inflation rate that caught markets’ attention. Core CPI for August came in at 6.3% yoy versus an expectation of 6.1% yoy and a prior reading of 5.9% yoy. The pressure not only exceeded expectations but was also much higher than the July reading. This set in motion expectations of a 100 basis point rate hike this week. At one point after the CPI release, expectations of a 100 basis point increase rose to almost 50%. However, cool heads seem to prevail as markets are now pricing in a 16% chance of a 100 basis point rate hike (meaning markets are also pricing in an 82% chance of a 75 basis point rate hike). Jobs numbers continue to impress with August NFP coming in at 315k and US initial jobless claims falling to the 5th Consecutive week to 213,000 for the week ended September 10thth.

FTSE reshuffle

It’s time of the quarter: time for the FTSE reshuffle. The reshuffle will take place on Tuesday due to Monday’s bank holiday, but will take effect from Monday. In the FTSE reshuffle, the FTSE Russell calculates UK company valuations to decide which stocks to include in which index. Abrdbn, Hikma and Howden will all leave the FTSE 100.

merits

FedEx surprised markets after the close on Thursday by withdrawing its guidance for fiscal 2023 and sending stock markets lower on recession fears. There are quite a few companies to watch this week. Will they also drop the lead? Below are some key earnings reports to watch this week:

COST, ACN, HLN, CINE, KGF, GIS, LEN, DRI

Economic data and other central banks

Last week markets got a big surprise with higher than expected US CPI data. Could we see any more surprises this week? The obvious focus for the week will be Wednesday’s FOMC meeting and Thursday’s BOE meeting. However, there are other central banks to look out for this week as well. These include the Riksbank, the BOJ, the SNB, the Norges Bank and the SARB. Any surprises by these central banks could cause volatility in their respective currencies. In addition, Australia will release its latest meeting minutes, Canada will release its August CPI and Flash Manufacturing and Services PMIs will be released. Other major economic news this week is as follows:

Monday

  • New Zealand: Services NZ PSI (AUG)
  • Canada: PPI (AUG)
  • USA: NAHB Housing Market Index (SEP)

Tuesday

  • Japan: Consumer Price Index (AUG)
  • Australia: RBA meeting minutes
  • Germany: EPI (AUG)
  • Sweden: Riksbank rate decision
  • Canada: CPI (AUG)
  • USA: Building Permits (AUG)
  • US: Housing Starts (AUG)

Wednesday

  • UK: CBI Industrial Trends Orders (SEP)
  • US: Existing Home Sales (AUG)
  • US: FOMC rate decision
  • Raw supplies

Thursday

  • New Zealand: Balance of Trade (AUG)
  • Japan: BOJ rate decision
  • Switzerland: SNB interest rate decision
  • Norway: Norges Bank rate decision
  • Mexico: Mid-Month Inflation Rate (SEP)
  • UK: BOE rate decision
  • US: Current Account (Q2)
  • South Africa: SARB rate decision
  • EU: Consumer Confidence Flash (SEP)
  • US: Kansas Fed Manufacturing Index (SEP)

Friday

  • Global: Global Manufacturing and Services PMI Flash (SEP)
  • New Zealand: Westpac Consumer Confidence (Q3)
  • UK: GfK Consumer Confidence (SEP)
  • UK: CBI Distributive Trades (SEP)
  • Canada: Retail Sales (JUL)

Chart of the Week: Gold of the Week (XAU/USD)

Source: Tradingview, Stone X

Gold (XAU/USD) had made a local low in the week of August 13thth, 2018 at 1160.25. Over the next 2 years the precious metal had moved up aggressively and in August 2020 gold hit a new all-time high at 2075.11! The price then pulled back and tested previous lows near 1670. However, the price started to climb higher on the week of March 7ththIn 2022, it tested and failed the previous all-time highs, forming an evening star formation on the weekly time frame. Since then, gold has been moving down in a descending channel. Last week the precious metal retested the 1670 level only to break through and hit a weekly low of 1654.25! By breaking the 1670 level (the neckline), it formed a double top pattern on a weekly timeframe. The goal for a double top is the height from the double top to the neckline added to the break point of the neckline. In this case, the target is near 1275, just above the April 2019 support. However, if the price is to reach its target, gold must first break through the 50% retracement level from the August 2013 lows to the August 2020 highs 1617.68. Below that, the price can drop to support at the lower trendline of the descending channel near 1565 and then the 61.8% Fibonacci retracement from the previously mentioned timeframe. However, should the break of 1670 prove a false break first resistance lies at weekly high 1735.21 then 8th August week highsth at 1807.91. Above this, gold can rally to highs starting in the week of June 13thth around 1879.16.

The focus for markets this week will be Wednesday’s FOMC meeting and Thursday’s BOE meeting. Both central banks are expecting high interest rates. However, both could surprise the markets and rise more than expected. Also, keep an eye out for possible volatility related to this week’s earnings releases as well as economic data from around the world. Also keep an eye on spot gold to see if it can trade below 1670 and stay there. If this is the case, gold could see a big drop!

Have a nice weekend!

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