FX Week Ahead – Top 5 events: inflation rates in Canada, the euro zone, Japan and the United Kingdom; American manufacturing PMI


Preview of the coming week on the forex market:

  • A significantly lighter economic calendar is forcing traders to watch inflation data and bond markets in mid-October.
  • Eurozone and Japanese inflation data may not do much to alter ECB or BOJ rate expectations, as both central banks are firmly entrenched in accommodative policies.
  • On the flip side, the BOC and BOE are heading towards policy normalization, putting inflation data in Canada and the UK in the spotlight.

For the whole week ahead, please visit the DailyFX Economic Calendar.


According to a Bloomberg News survey, UK September inflation rates (CPIH) rose + 0.4% vs. + 0.7% (m / m) while remaining stable last year at +3.2 % (y / y). UK core inflation is still expected to be relatively high at + 3.1% vs. + 3.2% (y / y). But the next UK inflation report has seen anticipation building for some time.

Earlier this month, the New Bank of England Chief Economist Huw Pill said that “the balance of risks is currently shifting towards major concerns about the outlook for inflation, as the current strength of inflation looks set to last longer than expected.” UK rate markets are now discounting the first 25 basis point rate hike to come as early as next month when the BOE releases the next iteration of its Quarterly Inflation Report (QIR).


Inflation is not a concern for the Eurozone than it is for the UK, although the data should show strong price pressure this week. According to a Bloomberg News survey, September euro area inflation rates (HICP) rose + 0.5% vs. + 0.4% (m / m) and + 3.4% vs. +3 % (y / y), while core euro zone inflation is expected at + 1.9% vs. + 1.6% (y / y).

In early October, the European Central Bank Chief Economist Philippe Lane stated that “the red zone for everyone is if inflation becomes persistent at a number that is immoderately above the inflation target – it is very far from where the zone is located. euro, “implicitly suggesting that the ECB will examine increasing price pressures and instead keep interest rates on hold for an extended period.


According to a Bloomberg News poll, the September The inflation rate (CPI) in Canada is expected to increase by + 0.1% from + 0.2% (m / m) and +4.3% of +4.1% (y / y), while the carrot reading is due in unchanged at + 3.5% (a / a). WWith inflation continuing to beat expectations, it looks likely that the Bank of Canada will soon restart its efforts to pull out the stimulus when it meets later this month. Currently, asset purchases are being made at a rate of C $ 2 billion per week. Following the superb employment data in Canada in September and the surge in energy prices – energy accounts for about 11% of Canadian GDP – there is reason to believe that there is less of the slowdown economy than expected in the middle of the year.


Japan may have a new prime minister, but the economic situation is still stagnant. According to a Bloomberg News poll, the SeptemberJapan the inflation rate (CPI) is expected show a decrease of -0.1% of -0.2% (m / m) and -0.1% from -0.4% (a / a), while the inflation rate excluding food and energy is expected to remain unchanged at -0.5% (y / y) and basic reading is the same due in unchanged at -0.5% (a / a). Rising energy prices pose a significant threat to the Japanese economy, which imports over 90% of its energy, but the fact remains that the Bank of Japan is poised to remain the central bank. most accommodating in the world in the long run.

22/10 FRIDAY | 2:00 p.m. GMT | USD MARKIT Manufacturing PMI (SEP)

The American economy Significantly slowed down over the summer months, with the Atlanta Fed 3Q’21 GDPNow forecasting a meager + 1.2% annualized. However, the crisis could prove short-lived, as measures of economic activity remain fairly strong by historical standards. The October US Markit Manufacturing PMI flash reading is expected at 60.3 vs. 60.7 in September, while the October US Markit Services Flash PMI is expected at 55.1 vs. 54.9. Overall, the readings suggest that short-term outlook for corporate earnings remains strong, which could help propel US stock indexes to all-time highs in the coming weeks.

— Written by Christopher Vecchio, CFA, Senior Strategist

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