BOE vs ECB Battle Royal: The Week Ahead

In this article, we look towards a busy week on the economic calendar, including the ECB and BoE meetings.
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In this article, we look towards a busy week on the economic calendar. The main highlights being the ECB and BoE monetary policy meetings.

The BoE event arrives hot on the heels of UK GDP and wage data.

We also have Chinese and US industrial production, retail sales and inflation data releases.

United States

Last Friday we had US employment data. This came in above estimates at 201k for the headline Nonfarm payrolls.

We also had Average Hourly Earnings. This came in above estimates at 2.9% YY vs 2.7% forecast.

The spread between U6 and U3 unemployment tightening suggesting tightening labour conditions in the US economy.

US CPI will be released on Thursday. The headline CPI is expected to slow to 2.8% YY. The core rate is expected unchanged at 2.4%.

Scotiabank states that gasoline prices were less of an influence in August than they were in July.

UBS’s analysts say that US CPI may have peaked in July. They see the YY rate edging lower in the months ahead to 1.8%.

They also expect core CPI to move up a little through the end of the year.

US retail sales growth is expected to show a solid 0.4% MM gain. PPI is expected to slow to 3.2% YY.


Last week the RBA’s policy update was interpreted as more hawkish than the market had expected. The central didn’t adjust its rates.

The RBA noted that growth in H1 was above trend. The unemployment rate had fallen to the lowest in six years at 5.3%.

They also noted some encouraging signs of rising wages.

Several things continue to weigh on the AUD currency. These include recent USD strength and concerns over a slowing Chinese economy.

Another concern is over more tariffs being imposed on Chinese goods from the US.

Commodity prices have also seen pressure. Copper continued its slide from the start of the year.

The CRB Commodity index is also down since its high in May. It currently sits at 190.


It is also a busy week for Chinese data releases. This includes industrial production, fixed asset, and foreign direct investment, retail sales, inflation and credit growth.

Recent IHS Markit PMI showed that new business growth in China is the weakest in over two years. This is due to softer client demand.

The PMI data affirmed that the recent rollout of fiscal measures (including company tax cuts) is warranted.

The government has pledged to use proactive fiscal policy amid slower growth and ongoing structural reforms.

There is also the threat of more tariffs. US President Trump has stated he’s willing to impose another $267 billion on Chinese goods.

The US seems ready to apply these without notice.


On Thursday the BoE meet to set interest rates. They are expected to remain on hold after the August rate hike.

Recent PMI data highlighted the fact that the UK economy is now more reliant on services to support growth.

There is a particular reliance on the financial services sector.

Brexit negotiations are increasingly worrying businesses. The outlook currently shows more risk to the downside.

The EU are reportedly preparing to give instructions to EU Chief Brexit Negotiator Barnier. These will insist on helping the two sides to achieve a Brexit deal.

BoE MPC vote is 9-0 in favour of unchanged from prior.

The MPC will likely stick to their gradual and limited narrative on rate hikes.

Brexit developments will be the biggest driver of GBP this week.


The ECB also meet Thursday, with no change expected to rates till September 2019. Attention will be on the policy meeting.

The QE programme is drawing to a close and they have released only limited guidance.

This could cause attention to current risks to the Eurozone economy.

Recent PMI data showed steady economic growth in August. It also showed signs of faltering growth in some countries.

Manufacturing especially is coming under increasing pressure from trade worries.


NAFTA continues to be the main influence on the CAD.

The BoC held rates at 1.5%. They also left the door open for a 25bps hike at the October meeting.

They will also update economic forecasts.

In the final paragraph on the press release, the BoC stated that recent data reinforce the Governing Council’s assessment that higher interest rates will be warranted.

Deputy Governor Wilkins stressed that higher rates will be warranted. They will be raised at a gradual pace.

Her comments raised expectations of an October hike from the BoC.

She revealed the current trade environment dominated the council’s discussion at it’s September meeting.

The Governing Council discussed whether a gradual approach to rate hikes was still appropriate. They agreed that it was.

This all means that any positive NAFTA developments will see the CAD well supported.

New Zealand

Recent data and comments from the RBNZ keep the NZD under pressure.

The RBNZ lowered its forecast for economic growth over the coming year.

This came amid a slump in business confidence. Other reasons include a cooler housing market and risks to New Zealand exports from global trade tensions.

Business confidence was the lowest in ten years falling to -50.3.

RBNZ assistant governor McDermott commented that the chances of a rate cut have increased.

This week PMI data should be interesting to see if the downward trend continues for the NZ economy.

If you have any questions about this week’s trading opportunities please leave them in the comments section below.




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