Most Important Economic Events of the Week 09.27.2021 – 10.03.2021

Having received support from the sharply increased yields on US government bonds, the dollar closed last week with a slight but gain. The DXY dollar index, reflecting the value of the dollar against a basket of 6 major currencies, added 0.14% last week. The stronger dollar was constrained by disagreements among the Fed leadership over the future plans of the central bank's monetary policy.

Based on the forecasts presented last Wednesday, when the next Fed meeting ended, only half of its leaders believe that by the end of 2023 rates will need to be raised by 1 percentage point from current levels and by another three quarters of a percentage point in 2024.

The other half of the Fed officials called for even greater caution in raising rates, pointing to the risks associated with an increase in the incidence of Covid-19, which could lead to another round of economic recession and a slowdown in the recovery of the labor market.

The American economy has created an estimated 4.7 million jobs to date, less than half of those lost since the start of the pandemic, when 10 million Americans lost their jobs. Also, most Fed leaders believe that inflation will slow to 2.3% in 2022 and to 2.2% in 2023.

Well, since the full recovery of the American labor market, judging by the latest data, is still far away, the prospect of an increase in interest rates by the Fed may also move again to a later date, despite the official statement of the Federal Reserve Committee on Open Market Operations (FOMC), according to which the slowdown in asset purchases may be announced at the next meeting, which will take place on November 2-3.

At the same time, optimism seems to be returning to global stock exchanges.

So, following the results of a very volatile trading week, the main American stock indices closed it still in positive territory, with a small but gain.

Next week will be transitional, between September and October, as well as between the 3rd and 4th quarters of the year, and financial market participants will pay attention to the publication of important macro statistics for the USA, Germany, Eurozone, Australia, China, Great Britain and Canada.

Of the most significant macroeconomic data, the publication of which is expected next week, it is worth noting the following:

*) new events can be added to the calendar and/or some scheduled events canceled during the coming week

**) specified time – GMT

Monday, September 27

12:30 USD Orders for durable goods. Orders for capital goods (excluding defense and aviation)

 This indicator reflects the value of orders received by manufacturers of durable goods and capital goods (capital goods are durable goods used for the production of durable goods and services), involving large investments. Goods produced in the defense and aviation sectors of the American economy are not included in this indicator. A high result strengthens the USD. Previous values of the indicator "orders for durable goods": -0.1% in July, +0.9% in June, +2.3% in May, -1.3% in April, +1% in March, -1.2% in February, +3.4% in January 2021.

Previous values of the indicator "orders for capital goods excluding defense and aviation": 0% in July, +0.7% in June, +0.1% in May, +2.2% in April, +1% in March, -0.9% in February, +0.6% in January 2021.

In theory, the relative growth of the indicator has a positive impact on the dollar; the market reaction to its negative value may be negative for the dollar in the short term. Data worse than the previous value will also have a negative impact on the dollar quotes.

Forecast for August: +0.6% (orders for durable goods), +0.5% (orders for capital goods excluding defense and aviation).

It seems that the growth of indicators has slowed down, although it continues after their recovery in previous months from a strong drop in March and April 2020, which should have a positive effect on the dollar quotes. Better-than-expected data will also have a positive impact on the dollar.

23:50 JPY Bank of Japan Monetary Policy Committee Meeting

At this meeting, the Monetary Policy Committee of the Bank of Japan will once again sum up the results of the bank's regular meeting last week, analyze the economic situation in Japan and give indications on possible future prospects for the Bank of Japan's financial policy.

If the tone of the minutes of the meeting indicates the firmness of intentions of the Bank of Japan regarding monetary policy in the country, it will negatively affect the Japanese stock market and strengthen the yen. Conversely, mild rhetoric about the bank's monetary policy prospects will contribute to the weakening of the yen and the growth of the Japanese stock market.

Tuesday, September 28

00:30 AUD Retail Sales

The Retail Sales Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the AUD; a decrease in the indicator will negatively affect the AUD. Previous index value (for July) is -2.7% (after decrease by -1.8% in June). If the data turns out to be weaker than the previous value, then the AUD may sharply decline in the short term, above the previous values, then the AUD is likely to strengthen.

Wednesday, September 29

No important macro statistics are scheduled to be published.

Thursday, September 30

01:00 CNY Chinese Federation of Logistics and Procurement (CFLP) PMIs of Business Activity in Services and Manufacturing in China

These indicators assess the state of the service and manufacturing sectors in the Chinese economy. A result above 50 is considered positive and strengthens the yuan. Previous PMI values ​​for the services sector: 47.5 in August, 53.3 in July, 55.2 in May, 56.3 in March, 51.4 in February, 52.4 in January. The indicator is above 50, which is likely to have a positive effect on the yuan quotes, even with a slight relative decline. If the indicator is below 50, the yuan will be under pressure and likely to decline. Forecast for September: 53.2.

Previous PMI values ​​for the manufacturing sector: 50.1 in August, 50.4 in July, 51.0 in May, 51.9 in March, 50.6 in February, 51.3 in January.

The relative growth of the index and the indicator above the value of 50 should have a positive effect on the CNY. The data above the value of 50 indicates an increase in activity, which has a positive effect on the quotes of the national currency. In the opposite case, and if the indicator is below 50, the yuan will be under pressure and, probably, will decline. Forecast for September: 50.2.

06:00 GBP UK Q2 GDP (Final Release)

GDP is considered to be an indicator of the overall health of the British economy. The upward trend in GDP is considered positive for the GBP. The UK's GDP was one of the highest in the world until 2016, when the Brexit referendum was held. In the future, its growth slowed down, and with the onset of the global coronavirus pandemic, the growth rate of British GDP went into negative territory altogether.

Preliminary forecast for the 2nd quarter was: +4,8% (+22.1% YoY) after -1.6% drop in the 1st quarter of 2021, -19.8% in the 2nd quarter and an increase of +1.3% in the 4th quarter of 2020). The main factors that can force the Bank of England to keep rates low are weak GDP and labor market growth, as well as low consumer spending. If the GDP data turn out to be even worse than the negative forecast (-1.5% and -6.1% in annual terms), it will put downward pressure on the pound. Strong GDP report will strengthen the pound.

09:00 EUR Consumer Price Index. Core CPI (Pre-release)

The Consumer Price Index (CPI) is published by Eurostat and measures the price change of a selected basket of goods and services over a given period. The index is a key indicator for assessing inflation and changes in purchasing habits. A positive result strengthens the EUR, a negative one weakens it. At the end of 2020, the CPI index fell by -0.3%, which indicated low inflationary pressures and even a slowdown in inflation. However, in 2021, inflation in the Eurozone began to accelerate, periodically exceeding the target level of the ECB. Previous CPI values: +3.0% in August, +2.2% in July, +1.9% in June, +2.0% in May, +1.3% in March, +0.9% in January and February. If the data turn out to be worse than them, then the euro may drop sharply in the short term. Data better than the previous value may strengthen the euro in the short term. Recall also that the target level of consumer inflation by the ECB is slightly below 2.0%.

The Core Consumer Price Index (Core CPI) determines the change in prices of a selected basket of goods and services for a given period and is a key indicator for assessing inflation and changes in consumer preferences. Food and energy have been excluded from this indicator to provide a more accurate estimate. A high result strengthens the EUR, and a low result weakens it. Core CPI rose +1.6% in August, +0.7% in July, +0.9% in June, +1.0% in May 2021, +0.7% in April (YoY) after more modest values ​​of +0.2% between September and December 2020. If the data for June turn out to be worse than the previous value, then this may negatively affect the euro. If the data turn out to be better than the forecast or the previous value, then the euro is likely to respond with an increase in quotations, but only in the short term. Core inflation in the Eurozone remains low, which is a negative factor for the euro.

12:00 EUR Harmonized Consumer Price Index (HICP) in Germany (preliminary release)

This index is published by the EU Statistical Office and is calculated on the basis of a statistical methodology agreed between all EU countries. It is an indicator for assessing inflation and is used by the Governing Council of the ECB to assess the level of price stability. A positive result strengthens the EUR, a negative one weakens it. Previous indicator values: +3.4% in August, +3.1% in July, +2.1% in June, +2.4% in May, +2.1% in April, +2.0% in March, +1.6% in January and February, -0.7% in December and negative values ​​in the second half of 2020 (in annual terms). If the data turn out to be better than the previous values, then the euro may strengthen in the short term. The growth of the indicator is a positive factor for the euro. The data suggests increasing inflationary pressures in Germany. The data is worse than the previous value will negatively affect the euro.

12:30 USD Annual US GDP for the 2nd quarter (Final Estimate)

GDP data is one of the key data (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. A strong result strengthens the US dollar; a weak GDP report negatively affects the US dollar. In the previous 1st quarter GDP grew by +6.4%, in 4th quarter - by +4.3% after an increase of +33.4% in Q3 2020, and after a drop of -31.4% in Q2 and -5.0% in Q1 2020.

If the data points to a decline in GDP in the 2nd quarter, the dollar will be under pressure. Positive GDP data will support the dollar and US stock indexes, although they are already mostly taken into account in prices. The preliminary forecast for the 2nd quarter of 2021 was +8.2%, and in fact +6.6%.

23:50 JPY Tankan Large Producers Index

This index reflects general business conditions for large manufacturing companies in Japan and is an indicator of the current state of Japan's export-oriented economy, which is heavily dependent on the industrial sector.

Rising values ​​and the value of the indicator above 0 (zero - the middle line) is a positive factor for the JPY, and the value of the indicator below 0 is negative.

According to the forecast, the index value is expected to be 13 (for the 3nd quarter of 2021) after rising to a value of 14 in the 2nd quarter of 2021 and falling to -10 in the 4th quarter of 2020 (-27 and -34 in the 3rd and 2nd quarters of 2020, respectively), which is likely to support the yen, but, above all, Japanese stock indices, despite a slight relative decline in the value.

Friday, October 01

06:00 EUR Retail sales in Germany

Retail sales is the main indicator of consumer spending in Germany, showing changes in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast: -0.9% (+3.7% y / y) in August against -5.1% (-0.3% y / y) in July, against +4.2% (+6.2% y / y) in June, +4.2% (-2.4% y / y) in May, -2.0% (+4.4% y / y) in April, +7.7% (+11% y / y) in March, +1.2% (-9.0% y / y) in February, -4.5% (-8.7% y / y) in January.

The data indicate the instability of the recovery of this sector of the German economy, including due to lockdowns due to the coronavirus. Better-than-expected data is likely to have a positive effect on the euro, but in the short term.

14:00 USD Index (PMI) of business activity (from ISM) in the manufacturing sector of the US economy

Published by the Institute for Supply Management (ISM), the US Manufacturing PMI is an important indicator of the health of the US economy as a whole. A result above 50 is seen as positive and strengthens the USD, below 50 as negative for the US dollar. Forecast: 59.9 in September (against 59.9 in August, 60.8 in July, 60.6 in June, 61.2 in May, 60.7 in April, 64.7 in March, 60.8 in February, 58.7 in January, 60.7 in December). The index is above the 50 level and has a relatively high value, which is likely to support the dollar, despite the relatively small decrease in the indicator. The data above the value of 50 indicates an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator falls below the forecast, and especially below the value of 50, the dollar may sharply weaken in the short term.