Weekly Outlook, 5-9 September

Bankers' week

After an initial reaction to Friday’s US mixed employment data, market participants finally realized that the labor market was still strong, which caused a sharp fall in the last trading hours. Moreover, later this month, eyes will be on the central bank's reactions and policies, which start with RBA, BoC, and ECB meetings later this week. Besides central banks' decisions and other economic data, in the week ahead, do not forget to follow the news of more lockdowns in China. Let's review the most important event and data in the week ahead with me Ahuar, and IFC Markets.

OPEC meeting – Monday

OPEC-JMMC meeting attended by representatives from the 13 OPEC members and 11 other Oil producers will hold on Monday. While we are not waiting for any decision in this meeting, their analysis of the oil market and conditions will help us to learn what we have to expect from the OPEC minister meeting. News about new lockdowns in China and weaker global economic conditions, for now, has caused a decrease in the price of oil.

Reserve Bank of Australia Rate Decision – Tuesday

After a 50-basis point rate hike in August, it is expected that RBA to start the next round of central banks' rate hikes with another 50 basis points in early Tuesday. It is also possible to see that RBA dropped its other extraordinary monetary supports and raised the rates by 25 basis points. However, both of these decisions will result in a temporary increase in Aussie and a further decrease in the stock market. A faster rate hike would not be a good shock for stock markets.

US ISM Services – Tuesday

Last week we had manufacturing ISM numbers; both orders and employment numbers in expansion territory were better than expectations. This week we have to watch the data from the service sector. Since many people were traveling in August and the price of gasoline had decreased, we can see good growth in this sector. The growing expected numbers can increase the expectations from FED for more aggressive policies and pressures on stock markets.

Bank of Canada Rate Decision – Wednesday

While it is expected to see a less hawkish BoC after the September meeting, this meeting is still likely to see the Canadian Central Bank as one of the most hawkish banks among the G10 countries, with a 75-basis point rate hike to 3.25% after 100 basis points rise seen in July. Despite decreasing inflation in recent months, it is still so high and will likely remain too high for some time. This expected policy must lift the CAD against its crosses.

European Central Bank Rate Decision – Thursday

Unlike Canada and Australia, Eurozone inflation seems far from being peaked; for this reason, there are significant differences of opinion between some members of the ECB Council for the increase of 50 or 75 basis points in the interest rates. The overall estimate is 50 basis points, as the risk of increasing unemployment with a faster rate hike causes some doubts among policymakers. In any case, ECB still is not as hawkish as other Major central banks, and while the European economic situation is disappointing, it is not expected to help the Euro much against its crosses.