Daily market analysis

Week Ahead: Central Banks in Focus as Markets Await Next Steps

September 19, 2022

Four central banks will announce their interest rate decisions this week, with the Fed’s decision and its monetary policy the main focus.

Data releases from the US, Australia, Canada, Germany, the UK, and France will also take place this week.

Australia Monetary Policy Meeting Minutes | 20 September 2022

The Reserve Bank of Australia raised the cash rate by 50bps to 2.35% during its September 2022 meeting in line with market expectations.

The central bank said it aimed to keep inflation from 2% to 3% while maintaining economic growth. It announced that it would continue to raise interest rates gradually but that these hikes would not be performed according to any pre-set timetable, as the data received from incoming economic reports would influence the size and timing of these hikes.

Canada Consumer Price Index | 20 September 2022

According to Statistics Canada, Canada’s consumer price index rose 0.1% in July over the previous month. It was the third consecutive monthly gain and followed a 0.1% increase in June. Analysts predicted that the index would rise by another 0.1%.

US FOMC Statement and Fed Funds Rate | 22 September 2022

In its July 2022 meeting, the Fed raised the target range for the fed funds rate by 75bps to 2.25%-2.5%, the central bank’s fourth consecutive rate hike.

Investors were pricing in a more than 81% chance of another large 75bps hike in Fed funds futures by September.

Bank of Japan Outlook Report | 22 September 2022

The Bank of Japan voted 8-1 to maintain its key short-term interest rate at -0.1% for 10-year bond yields at around 0% during its July meeting.

In addition, the bank cut its 2022 GDP growth forecast to 2.4% from 2.9% in April, citing a slowdown in overseas economies and persistent supply chain issues due to the prolonged war in Ukraine.

Swiss National Bank Policy Rate and Monetary Policy | 22 September 2022

In its June meeting, the Swiss National Bank increased its policy rate by 50bps to -0.25%, surprising financial markets that had expected the central bank to leave its policy rate unchanged.

Analysts expect another 75bps rate hike.

Bank of England Official Bank Rate and Monetary Policy | 22 September 2022

The Bank of England raised its main rate by 50bps to 1.75% during its August 2022 meeting, the sixth consecutive rate hike, pushing borrowing costs to the highest since 2009.

Analysts expect another 50bps rate hike.

French Flash Services PMI | 23 September 2022

In August 2022, France’s Services PMI fell to 51.2 from 53.2 in July. This marked the fourth consecutive month of slowing growth in the services sector and its weakest expansion since April 2021.

Confidence among businesses sank to its lowest level since November 2020. The report cited concerns about the impact of still-elevated inflationary pressures on demand.

German Flash Manufacturing and Services PMI | 23 September 2022

Germany’s Manufacturing PMI fell to 49.1 in August of 2022, indicating that factory activity continued to decline for the second month and hit its lowest level since June 2020.

Flash Services PMI declined to 47.7 in August of 2022, indicating that services activity contracted for the second consecutive month and at the fastest pace since February 2021.

Analysts expect Germany’s Manufacturing PMI to fall to 47.1 and its Flash Services PMI reading to improve to 49.5.

UK Flash Manufacturing and Services PMI | 23 September 2022

The UK Manufacturing Purchasing Managers Index (PMI) fell to 47.3 in August, indicating that factory activity had contracted for the first time since May 2020. The UK Services PMI decreased to 50.9 in August 2022 after recording expansion for 18 months. The slowdown reflected higher inflationary pressures and a cost-of-living squeeze that instilled economic uncertainty and reduced client confidence.

Analysts expect the UK’s Manufacturing PMI to go above 50.2 and the Flash Services PMI to decline below 50.

US Flash Services PMI | 23 September 2022

The August US Services PMI declined to 43.7, its lowest reading since May 2020, from 47.3 in July. This pointed to the sharpest contraction in the services sector since May 2020.

The US Flash Services reading is expected to be better at 45.0.