ECB to loosen policy, data to prompt Fed and BoE easing bets?

Forex
Indices

Welcome to your guide to the week ahead in the markets. 

ECB monetary policy meeting  

Expectations are high ahead of this week’s European Central Bank policy meeting. A run of poor Eurozone data has raised bets on further rate cuts, while investors have snapped up government bonds in the bloc in anticipation of a potential restart to the quantitative easing programme. 

US ISM was dire – will CPI, retail sales and sentiment be any better? 

Key releases on the US calendar this week could crank up the odds of more easing from the Federal Reserve before the year is through. Last week’s ISM manufacturing print shocked, with the index falling into contraction territory. Soft readings from the upcoming CPI, retail sales, or University of Michigan sentiment index could see further dovish bets. 

UK GDP and average earnings – background noise? 

Sterling remains almost exclusively at the mercy of Brexit-related news flow, but growth and wage figures might draw some attention. After having been stuck on hold thanks to the uncertainty of Brexit, the Bank of England may have to be quick out of the starting gate once the October 31st departure deadline passes. Data recently has been weak and another blow from either growth or earnings would see expectations of a rate cut climb. 

Kroger earnings 

It’s been another bad year for Kroger so far. KR is down 12% year-to-date, compared with rises of 14% for the S&P 500 and 16% for its industry. Peers such as Target and Walmart have had strong quarters. Will Kroger’s own investments in expanding online and delivery offerings help it deliver a strong Q2 report? 

Corporate diary 

September 11thHermes InternationalH1
September 12thWM Morrison SupermarketsQ2 2020
September 13thKrogerQ2

Coming Up on XRay

We’re got loads of great sessions for you this week. with our expert guests and residents. Watch live, or catch up when it’s convenient for you. Subscribe to submit questions that our presenters answer in real time.

07.15 GMTSeptember 10thEuropean Morning Call
15.30 GMTSeptember 10thAsset of the Day: Bullion Billions
15.45 GMTSeptember 10thAsset of the Day: Oil Outlook
07.00 GMTSeptember 12thLive Trading Room
18.00 GMTSeptember 12th The Stop Hunter’s Guide to Technical Analysis

Key Economic Events

Stay ahead of the markets by understanding what key economic events are coming up, and what impact they could have on your trades.

08.30 GMTSeptember 9thUK Monthly GDP
01.30 GMTSeptember 10thChina CPI
08.30 GMTSeptember 10thUK Average Earnings
00.30 GMTSeptember 11thAustralia Westpac Consumer Confidence
11.45 GMTSeptember 12thECB Monetary Policy Rate and Statement
12.30 GMTSeptember 12th US CPI
12.30 GMTSteptember 13thUS Retail Sales
14.00 GMTSeptember 13th US Preliminary Michigan Sentiment Index

Could this be the biggest monetary policy meeting in years?

Forex

Could the upcoming Federal Open Market Committee (FOMC) be the most watched monetary policy meeting in a long time?

It certainly has a lot weighing on it.

Stocks are at record highs, pushed higher by a certainty that the FOMC will cut short-term interest rates for the first time in a decade this week. The two-day policy meeting kicks off on Tuesday, with a policy decision announced on Wednesday.

While Chairman Jerome Powell signalled a cut in July, its unclear what the policy could be for the rest of the year. And is a cut even necessary? While the consensus is that a cut is coming – the only quibble is 25bps or 50bps – the recent economic data looks strong. As our Chief Markets Analyst, Neil Wilson, explains:

“Is a cut justified? I would point to underlying core CPI at 2.1%, retail sales +3.4% in June and a 50-year low in unemployment as perhaps arguments to the contrary. Increasingly there is a sense that the Fed is no longer data dependent, but being held to ransom by the White House and the market.”

But what can we expect from the meeting?

The answer is, it depends…

Confirmation of a cut from the FOMC, if paired with signals of a more dovish policy in the long term could send greenback diving.

On the flip side, if the markets are surprised and a cut doesn’t happen, expect stocks and commodities to tumble and the dollar to surge.

At this stage, despite stronger-than-expected data, growth momentum is weaker. While a recession has been avoided, a cut is still the safe bet. This policy meeting could define the direction of global monetary policy for years to come and provides a lot of opportunities for traders. One thing’s for sure, the announcement on Wednesday is not one to miss.

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