There seems to be fewer economic releases scheduled for next week; but rest assured, the indicators that do populate the docket are major market movers. And, considering the week begins on an extended holiday weekend for the US market (read low liquidity); there is a considerable need for top event risk. Boiling the entire week down into two themes, we have central bank rate decisions and the top-ranked non-farm payrolls release. The rate decision will charge the market back up to full capacity through the week (only the RBA is expected to change rates) before payrolls offers is outlook on growth for the US and further the global economy.
• Reserve Bank of Australia Rate Decision – September 2 In a week of four central bank meetings, the Reserve Bank of Australia’s decision is the only one expected to bear fruit. Over the past few months, the market has been pricing in deep easing from the policy authority (100 to 150 basis points over the coming year) after Governor Stevens suggested the group was trying to decide when the group would deliver its first cut in five years. Considering the short-term and long-term outlook for policy speculation, this decision will be pivotal in gauging whether the RBA will actually go for an aggressive path of easing and the Aussie will maintain its momentous decline. If rates are kept at 7.25 percent, then it is very likely that traders will feel the currency is vastly oversold.
• US ISM Manufacturing Survey – September 2 Though this indicator has been somewhat lost in the fray of financial turmoil, surging commodity prices and interest rate policy; the ISM manufacturing activity gauge was once the top market moving indicator (even beating out NFPs). Obviously the survey has lost some of its tout; but it may nonetheless be growing in stature. With the US dollar rallying off the strong 2Q GDP number, the market is now left to determine whether the housing recession and slowdown in consumer spending will truly drag the economy back into the red. One sidelined component to activity has been business activity. Capital investment, employment and revenues are engines for growth. If this indicator slips back under water, third quarter growth could be in for a reading more like the 4Q 2007 contraction rather than the 2Q 2008 surprise.
• European Central Bank / Bank of England Rate Decisions – September 4 Though both of these policy authorities are expected to hold rates steady and they come out at different times, they are all part of one big build up to a potential breakout. The BoE decision comes out at 11:00 GMT, and is looking at no shift. What’s more, when there are no changes to policy, the MPC is usually quiet. However, we have seen instances in the past, were silence speaks very loudly for the future; and 13-month lows in GBPUSD could benefit from a sign that the central bank isn’t easing yet. The ECB’s decision could have an impact on the euro and pound. We have seen the UK suffer from readings of slower growth (through exports); and a surprise cut or genuine concerns for the European economy from Trichet during the public address could easily drive the euro lower (on a stepped up rate cut timetable) and the pound (as its trade partner reins it in).
• Canadian Employment Change – September 5 Though often finding its thunder has stolen been stolen by its US counterpart, history shows that the Canadian employment change is consistently a top market moving indicator. Like it is south of the boarder, employment in Canada is a clear sign of economic health and the outlook for economic health. Last month, the series printed the biggest drop in employment since 1991, so August’s figure will be that much more market moving. Should another sharp drop be realized, it would mean that labor trends have genuinely taken a dramatic turn. On the other hand, an equally massive rebound would suggest it was just a fluke; and the Canadian dollar would likely rally. It is best to play this data with the US NFPs (due an hour-and-a-half later) in conjunction. If they both line up with similar direction surprise, it can really get the USDCAD moving.
• US Non-Farm Payrolls (NFPs) – September 5 The reigning champion for economic event risk, the NFPs have seemed to lost their influence over the past few months. However, this won’t last for long. Consumer accounts for 70 percent of the US economy; and there employment and wages direction translate into spending and expansion. With economists forecasting the eighth consecutive contraction from this series (the longest trend since the fallout from the last recession), the optimism surrounding the strong 2Q GDP number will quickly fade. Looking more critically at the last growth report, trade accounted for 3.1 percentage points of the 3.3 percent pace of expansion, while consumer activity stalled. If that turns into a consumer contraction, there is little hope for growth. See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.
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