This week is packed with key economic data and events, including manufacturing and services PMIs from major economies, alongside interest rate decisions from the Swiss National Bank (SNB) and the Reserve Bank of Australia (RBA).
After a major week of central bank rate decisions, investors will refocus on global economic indicators.
The spotlight will be on September’s flash manufacturing PMIs from major economies.
Additionally, the Swiss National Bank and the Reserve Bank of Australia are due to announce their interest rate decisions.
Following the Federal Reserve’s jumbo rate cut, these decisions are expected to have a greater influence on their respective currencies and equities.
Europe
S&P Global is set to release September’s estimated manufacturing and services PMIs for key eurozone economies, with a particular focus on France and Germany.
Both nations have experienced a contraction in manufacturing activity since July 2022, with the exception of a brief expansion in France in January 2023.
Germany’s manufacturing sector saw a marked downturn in August, as the PMI fell to 42.4, its lowest level since March, driven by sharp declines in new orders, purchasing activity, and employment.
France reflected a similar trend, with the PMI falling to 43.9 in August from 44 in July, marking the steepest contraction since January.
The eurozone’s composite manufacturing PMI is also expected to show further contraction in September, extending a two-year decline, with analysts forecasting continued weakness across the region.
In contrast, services PMIs across the Eurozone have shown resilience, expanding since February, largely due to a rise in new business.
While France’s service sector saw a significant boost in August, partly thanks to the Paris Olympics, Germany’s service growth slowed, showing a softer expansion.
Consensus forecasts suggest that services in both France and Germany, as well as the broader eurozone, will continue to grow in September.
Additionally, the German ifo Business Climate Index for September is expected to attract significant market attention.
Amid ongoing challenges in the car manufacturing sector and heightened political uncertainties, the index is forecast to decline further to 86.1, down from 86.6 in August, marking its lowest level since February.
This anticipated drop reflects growing concerns over Germany’s economic outlook, with weakening business sentiment adding to the country’s economic struggles.
The UK, on the other hand, has seen both its manufacturing and services sectors maintain an expansionary trajectory.
Manufacturing expanded for the fourth consecutive month, while services have been in growth since November 2023.
The Bank of England’s decision to hold interest rates steady last week, backed by resilient UK economic data, has helped support the strength of the British Pound, which recently soared to a two and a half year high against the US dollar.
Meanwhile, the Swiss National Bank (SNB) is expected to implement a third consecutive rate cut this week.
Markets are currently pricing a 60% probability of a 0.25% reduction and a 40% chance of a larger 0.5% cut.
The SNB has concerns over the strength of the Swiss Franc following the Federal Reserve’s recent jumbo cut.
However, persistent high service prices remain a risk to inflation, which rose 1.1% year on year in August.
The US
In the United States, key economic data releases this week will include the flash manufacturing and services PMIs for September, the final second-quarter Gross Domestic Product (GDP) figure, and the Personal Consumption Expenditures (PCE) Index for August.
These indicators will be pivotal in shaping market sentiment, particularly as discussions continue over whether the Federal Reserve will maintain the current pace of rate cuts.
Manufacturing activity in the US is projected to contract for the third consecutive month, while the services PMI is expected to remain in expansion territory, though at a slower rate in September.
The GDP growth rate for the second quarter is likely to be revised down slightly, to 2.9% on an annualised basis, compared to the previous estimate of 3%.
Overall, these data point to softening economic growth.
In terms of inflation, July’s PCE index remained steady at 2.5%, with core PCE at 2.6%, still above the Fed’s 2% target.
However, inflation is anticipated to continue easing, which would provide further support for the Federal Reserve to maintain its easing cycle.
Asia Pacific
The Reserve Bank of Australia (RBA) is set to announce its interest rate decision on Tuesday, with expectations that the rate will be held steady at 4.35%.
While many other central banks have begun easing their monetary policies, the RBA is unlikely to follow this trend.
In July, consumer prices in Australia increased by 3.5%, well above the RBA’s target of 2%, keeping pressure on the central bank to maintain a tighter stance.
Australia will also release its Consumer Price Index (CPI) data for August on Wednesday.
While consensus forecasts suggest that inflation may have eased to 2.8% year on year, this is not expected to influence the RBA’s upcoming decision, as inflation remains above target
