Lower Open Expected for European Markets

CMC

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Forex

Economic

Summary:

The Fed also kept the prospect of another rate hike in November very much on the table with Governor Michelle Bowman and Susan Collins of the Boston Fed reinforcing that messaging over the weekend.

Last week the FTSE100 pushed up to its best level since late May before finishing the week slightly lower. Unlike its peers in the US and in Europe the FTSE100 is on course to finish the month higher, while the Nasdaq 100, S&P500 and DAX all look set to close out the month lower.

US markets have looked particularly vulnerable after last week's hawkish Fed meeting saw the US central bank revised up its Fed Funds target rate for 2024 to 5.1% from 4.6%, as a more resilient US economy reinforced the higher for longer mantra, which in turn served to push US 2-year yields to their highest levels since 2006 and 10-year yields to their highest levels since 2007.

The Fed also kept the prospect of another rate hike in November very much on the table with Governor Michelle Bowman and Susan Collins of the Boston Fed reinforcing that messaging over the weekend.

German and French yields have also pushed higher in the last 2 weeks in the wake of the ECB's surprise decision to hike rates by 25bps despite increasing evidence that the economy in Europe is struggling significantly. Unsurprisingly this decision weighed on markets in Europe which slid back sharply last week.

We also saw the S&P500 close at its lowest level since 9th June at the end of last week, as well as closing below its 100-day SMA for the first time since March. The Nasdaq 100 also finished the week below its 100-day SMA for the first time since 19th January in a sign that the upward momentum that has been the hallmark of the US markets' resilience may be starting to break down.

The outperformance of the FTSE100, which has struggled to push higher this year, can partly be explained by the fact that the Bank of England is probably done when it comes to raising rates, after last week's finely balanced decision to call a pause to the current rate hiking cycle. This realisation that additional rate hikes could do more harm than good in the face of a squeezed consumer has seen UK gilt yields plunge in the last 2-weeks with the UK 2-year yield slipping to its lowest since mid-June and offering some welcome relief to mortgage holders and the banks and real estate sector in the process.

This weakness in yields has unsurprisingly hurt the pound which looks set to be the worst performing G8 currency this month and on course for its biggest monthly decline since August last year.

The extent of this weakness particularly against the euro seems a little overdone given the weakness in the European economy could force the ECB into a rate cut sooner than perhaps it would like given the dire performance being seen in some of the recent PMI numbers.

The problem facing all the central banks is the rise in the oil price which if it continues unchecked could choke off any semblance of a rebound in economic activity. With Brent crude prices at 10-month highs and core inflation still uncomfortably high the price for keeping a lid on inflation could well see current interest rate levels remain higher for a lot longer.

This is especially true in the UK, where while we may have averted the worst of what markets were pricing for UK rates, when the terminal rate was being priced at 6%, we could find that it could be a very long time before rates come down even a little.

Nonetheless stock markets do appear to be pricing in the very real prospect of a prolonged period of low growth, and high inflation, or stagflation and even possibly recession.

Recent economic data is already flashing warning signs to this effect with this morning's German IFO data for September set to reinforce this with further weakness towards last years low point of 85.2 expected in the business climate number. Current assessment is set to also weaken further towards August 2020 levels of economic activity.

This week's inflation data is expected to underpin the challenges facing central banks with the latest numbers from Australia, as well as core PCE \Deflator from the US as well as the latest flash CPI numbers for September from France, Germany, Spain as well as the wider EU flash number which is due on Friday, and which could show the ECB erred a couple of weeks ago when it tightened the rate hike screw further.

European markets look set to open lower this morning after the weak finish seen on Friday in the US.

EUR/USD – currently finding some support at the 1.0615 area, with a break below 1.0600 retargeting a return to the March lows at 1.0515. We did see a rebound to the 1.0740 area last week but we need to see a move back above 1.0780 to stabilise and minimise the risk of further losses to the lows this year at 1.0480.

GBP/USD – has slipped below the May lows at 1.2295 and could well sink further towards the 1.2190 area on the way to a retest of the 1.2000 area. Only a move back above the 1.2430 area and 200-day SMA stabilises and argues for a return to the 1.2600 area.

EUR/GBP – currently retesting the 200-day SMA at 0.8720, with a break above this key resistance arguing for a move back to the 0.8800 area. Support at the 0.8670 area.

USD/JPY – continues to squeeze higher towards the 150.00 area with support currently at the lows last week at 147.20/30. Major support currently at the 146.00 area.

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Forex

USD: End of a strong quarter

This week will see the third quarter coming to a close. The dollar has had a strong summer, gaining against all G10 currencies with the exception of NOK. Looking at the near-term outlook, this trend seems unlikely to change. Last week's FOMC's dot plot projections confirmed the Fed is not ready to call the end of the tightening cycle just yet, while a more aggressive "higher for longer" narrative emerged as the median 2024 rate forecast was revised to 5.1%.

When the Federal Reserve released dot plots that were more hawkish than market pricing back in June, we pointed at one key upside risk for the dollar. Unless the data started to point in the direction of economic slowdown, markets would have ultimately had to align with FOMC projections. The situation may look similar now, but the dot plot-market pricing gap is smaller.

Markets are pricing in an end-2024 Fed rate of 4.67% (effective rate), so 65bp of easing from current levels. Assuming the 2023 hike added to the Fed dot plots is not ultimately delivered, then the theoretical median 2024 rate projection drops to 4.85%, leaving approximately 20bp of repricing potential if US data remains firm. Back in June, the market-dot plot gap was much wider. Investors were looking at rates dropping to the 4.0% region by end-2024, against a median dot plot at 4.65%.

We continue to point at more upside risks to the dollar in the near term as the evidence of US activity slowdown may take longer to show. We think that ultimately, they will emerge and lead to a significant dovish repricing in US rates and a sharp dollar decline in 2024. However, those near-term upside risks for the dollar and short-term US yields are not as pronounced as they were in June when the gap between the market pricing and dot plot expectations for 2024 was wider.

This week will be quiet on the US data front, and the focus will mostly be on Fed speakers. Expect the arch-hawk Neel Kashkari to support the case for another hike and/or push back against rate cut bets tonight, while later this week we'll also hear from Fed Chair Jerome Powell. In general, Fedspeak should not be as effective as data in moving the market, but in a quiet, post-FOMC week, they can set the tone amid some quarter-end flows. DXY remains on track to break above 106.00 in the short term.

EUR: Focus on inflation this week

Eurozone's PMIs came in marginally better than expected on Friday but remained well in contraction territory, keeping concerns alive about negative GDP prints in the second half of the year. CFTC data shows that net EUR/USD long positions had been scaled back further and dropped below 15% of open interest for the first time since October 2022 in the week leading up to the Fed meeting. A hawkish FOMC and lack of good news on the growth side in the eurozone likely prompted speculators to keep unwinding net-long euro positions.

This morning, Germany will see the release of the Ifo surveys, which are all expected to inch lower on renewed business activity pessimism in the region. Later this week, CPI releases in the eurozone might prove to be a pivotal event for the euro, as an upside surprise would likely revamp depressed expectations for another European Central Bank (ECB) rate hike this year.

Barring a bullish CPI scenario for the euro, though, EUR/USD seems likely to test 1.0600 and risks remain skewed towards a move to 1.0500 in the near term. Today, ECB President Christine Lagarde will speak at the EU Parliament, and we'll also hear from Governing Council members Francois Villeroy de Galhau and Isabel Schnabel, but the euro's sensitivity to ECB speakers has been rather muted of late.

GBP: Weak PMIs suggest rates have peaked

The pound is on track to be the worst-performing G10 currency in the third quarter, having suffered a huge repricing of domestic rate expectations into last week's Bank of England pause. Friday's PMIs indisputably vindicated the BoE's decision to keep rates on hold by coming in lower than expected and pointing at deeper downside risks for the UK economy in the third quarter.

The BoE will see one inflation and wage release before the November meeting, but our economics team is now calling for another hold and the end of the tightening cycle in the UK. Markets agree with this view and only price in a 25% chance of a November hike and a 50% probability of a hike by December.

This week won't see any major data releases in the UK – except for the final second-quarter GDP figures – and there are only two scheduled BoE speakers. EUR/GBP has jumped to 0.8700 but may struggle to hold on to gains given the big bulk of the dovish repricing (unless eurozone CPI comes in strong) in the Sonia curve has happened and the euro's momentum is rather soft. When it comes to Cable, risks remain skewed to the key 1.2000 level being tested in the near future if the dollar remains strong.

CEE: Hawkish central banks fight dovish expectations

Central banks will take over the lead in the region this week. Today we start with labour market data from Poland and Hungary. The Hungarian National Bank is scheduled to meet tomorrow. We expect the central bank to merge the key and effective rates at 13%, ending phase one of normalisation. We don't expect any groundbreaking changes in the forward guidance. This means that the tone will remain generally hawkish, leaving all options open from a pause to a 100bp cut at the upcoming meetings, as the decision-making process is now agile and data-driven.

The Czech National Bank (CNB) will hold its monetary policy meeting next Wednesday, which we believe will be the last meeting before it begins to discuss the real possibility of rate cuts. This time there will be no new central bank forecast and the board will only discuss an internal update on the situation. Our forecast remains unchanged – a first 25bp rate cut in November alongside a new central bank forecast. On Friday, September inflation in Poland will be published, as always the first number in the CEE region. A further sharp decline in annual inflation is expected from 10.1% to 8.6% year-on-year.

On the FX side of the global story, the continued strong US dollar makes life painful for CEE FX. The main driver of course will be central bank communication this week, which in both cases should be hawkish and supportive of local FX. EUR/HUF touched 390 briefly on Friday, which may be a reason for the NBH to choose more hawkish words. In any case, we believe NBH should support HUF to stronger levels given the strongly dovish market expectations at the moment. EUR/HUF could thus see lower levels again closer to 386. The CNB should also help the Czech koruna to stronger levels with its cautious approach after the spillover of weakness from the PLN market. We see EUR/CZK below 24.40.

Source: ING

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Swissquote

Economic

Forex

Stocks

Bond

The week started on a cautious note as stocks in Asia mostly sold off following a rough week in the U.S., where the Federal Reserve's (Fed) hawkish pause triggered a fresh wave of worries that the rates would stay higher for longer.

The U.S. 2-year yield bounced lower after hitting 5.20%, yet the U.S. 10-year continues its journey higher and hit 4.50% on Friday.

The S&P500 slipped below its ascending base since last October, fell below its 100-DMA, and closed the week at the lowest levels since June, having recorded the worst performance over the week since the banking crisis in March.

BoFA said that equity investors are dumping stocks at the fastest level since last December, and Morgan Stanley warned that stocks are now 'fragile'. Indeed! More fragile than the S&P500 are the rate sensitive technology stocks, and the small cap stocks.

The growing divergence between the S&P500 and Russell 2000 index is also flashing 'recession', on top of the heavily inverted U.S. yield curve.

Elsewhere, the UAW strikes will broaden to all GM and Stellantis parts plants in the U.S., which means that 5600 more workers will join the movement (Ford will likely be spared, for now, as some good progress is made on negotiations with the UAW) and the U.S. will shut down by the end of the week if politicians fail to pass a dozen of bills.

The latest U.S. GDP update will fall in this chaotic environment, but the expectation is a positive revision from 2.1% to 2.3%.

In the currency markets, the U.S. dollar extends gains. The dollar index entered the bullish consolidation zone after the Fed kept the possibility of another rate hike before the year ends on the table when it met last week, and said that the rates will likely stay higher for longer next year.

The EUR/USD tested an important Fibonacci support last week, the major 38.2% retracement level which should distinguish between the positive trend building since last year, and a slide into the bearish consolidation zone. There is a stronger case for further euro weakness than the contrary.

Released last Friday, the preliminary September PMI figures were mixed; the Eurozone manufacturing further slowed but German numbers hinted at some improvement.

This week, we will see how the recent slowdown impacted the inflation dynamics in September. Headline inflation in the euro area is expected to have slowed from 5.2% to 4.5% this month, a slowdown that would defy the rising energy prices and the euro depreciation.

Core inflation is seen softening from 5.3% to 4.8%. Any softness in inflation figures should give further support to the euro bears, while higher than expected numbers, which I believe could be the surprise of this week could revive the European Central Bank (ECB) hawks, but will hardly prevent the euro from seeking into a deeper depression, as further ECB action would also mean a bigger hit on economies. That's a fear that will likely keep euro bulls away from the market for now.

On the corporate calendar, Micron Technology and Nike will be releasing their latest quarterly results, and TotalEnergies Investor Day Event will gather happy industry players as U.S. crude consolidates gains above $91pb with no big sign of a significant downside correction.

To stay updated on all economic events of today, please check out our Economic calendar

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SAXO

Commodity

Forex

Bond

Stocks

Energy

U.S. Equities

After two days of sharp selloffs, markets somewhat stabilized last Friday, but sentiment remained fragile and technicals weak. The S&P500 dropped 0.2%, hitting a new recent low, and the Nasdaq 100 ended nearly flat. Nvidia rose by 1.5%.

Fixed income

Treasuries recovered some of their losses post-FOMC, with the 10-year yield declining 6bps last Friday, closing at 4.43%. No specific news drove this movement. We believe that, like us, investors see value in Treasuries after the recent selloffs that pushed yields to levels not seen since 2007.

China/HK Equities

The Hang Seng Index saw a decent rally, reclaiming 18,000 and closing up 2.3% at 18,057. This may signal exhaustion in the recent selling waves. Additionally, China and the U.S. are forming working groups on economic and financial matters. China is also reportedly easing the 30% foreign ownership cap and 10% single foreign shareholder cap on listed companies. Technology stocks led the surge, with the Hang Seng Tech Index jumping 3.7%, driven by internet and EV stocks. Mainland investors, however, sold Hong Kong-listed stocks worth HKD4.2 billion, while overseas investors returned as net buyers, acquiring RMB7.5 billion worth of A shares. The CSI300 increased by 1.8%.

Dollar index closed a 10th straight week of gains with losses led by GBP and CHF after the BOE and SNB announced a surprise pause in their monetary policy decisions last week.

NZD emerged as the G10 outperformer with Q2 GDP data coming in better than expected, followed by SEK (on FX hedging announcement) and CAD (with oil prices staying higher).

USD/JPY rose back higher towards 148.50 after BOJ's announcement on Friday lacking any hints of a potential shift by early 2024. EUR/USD holding up above 1.0635 support and any upside in German Ifo today or hawkish Lagarde could bring it back closer to 1.07 with EUR/GBP testing a break above 0.87.

Commodities

Brent still around $93/barrel after Russia temporarily banned gasoline and diesel exports further adding to supply tightness concerns. Demand expectations, meanwhile, could get a lift this week with China travel expected to pick up. Iron ore prices rose to USD 121/t with strong demand from steel mills and restocking ahead of the National Day holiday week. Gold continues to be resilient despite Fed's hawkish tilt.

Macro

UK PMIs confirmed the hint in last Thursday's Bank of England Minutes that they had deteriorated. Manufacturing remained in contraction at 44.2 in August (prev 43) while services dipped deeper in contraction at 47.2 (prev. 49.5).
Eurozone PMIs were mixed with Germany improving but still remaining weak but France deteriorating. German manufacturing PMI was at 39.8 (prev 39.1) and services was 49.8 (prev 47.3), while France manufacturing PMI was at 43.6 (prev 46.0) and services at 43.9 (prev 46). Overall Eurozone manufacturing PMI dipped a notch to 43.4 from 43.5 while services held up but still in contraction at 48.4 vs. prev 47.9.
U.S. S&P Global PMIs saw manufacturing improve but services deterioate, but its Composite reading is still just above 50 (50.1 from 50.2) and of late has been sharply at odds with the more established (and much stronger) ISM surveys.
Fed speakers struck a hawkish chord with Governor Michelle Bowman (voter) saying she expects "further rate hikes". Boston Fed President Susan Collins (non-voter) and San Francisco Fed President Mary Daly (non-voter) talked about higher-for-longer.
The Bank of Japan maintained a dovish rhetoric, with Governor Ueda trying to undo the hawkish interpretations from his previous remarks. For a full review, read Friday's Macro/FX article.

In the news

U.S., China agrees to forge new economic, financial dialogues.
China mulls easing foreign stake limits to lure global funds.
Apple boosts retail worker pay to cope with tighter labor market.
Amazon to run ads in Prime Video shows and movies.
UAW strikes more GM, Stellantis facilities, cites Ford progress.
Microsoft's Activision Deal Clears Main Hurdle as U.K. Regulator Accepts Changes

Macro events

German Ifo (Sep) exp 85.2 (prev 85.7) due 16:00 SGT
U.S. Chicago Fed National Activity Index (Aug) due 20:30 SGT
ECB President Lagarde testifies to parliament, and the (usually hawkish) Schnabel speaks at 21:00 SGT

Key company events

Alibaba's Cainiao plans to raise at least $1 Billion in Hong Kong IPO soon
China Evergrande scraps creditor meetings in risk to US$20 billion debt restructuring as homes sales sag, lawsuits snowball. The Chinese developer is unable to meet the regulatory qualifications for the issuance of new notes under the proposed restructuring of offshore debts

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FXOpen

Forex

The USD/JPY pair remains flat below the mid-148.00s during the early European session on Monday. Markets turn cautious amid the fear of FX intervention by the Japanese authorities. The pair currently trades around 148.35, losing 0.01% on the day.

The Bank of Japan (BOJ) Governor Kazuo Ueda stated on Monday that Japan's economy recovering moderately and the central bank's basic stance is that they must patiently maintain monetary easing. Additionally, Japan's Finance Minister Shunichi Suzuki was out with some usual verbal intervention last week. He said that authorities will closely watch FX moves with a high sense of urgency and won't rule out any options for response to excessive FX volatility. Similarly, the Bank of Japan (BoJ) Governor Ueda emphasized the need to spend more time assessing data before raising interest rates. This, in turn, might cap the upside of the U.S. Dollar (USD) and act as a headwind for the USD/JPY pair.

Apart from this, economic data released on Friday revealed that Japan's National Consumer Price Index (CPI) for August came in at 3.2% YoY from 3.3% in July. Additionally, the National CPI ex Fresh Food improved from 3.0% in July to 3.1% in August, whereas the National CPI ex Food, Energy came in at 4.3% compared to 4.3% in previous readings.

On the USD's front, Friday's Purchasing Managers Index data prompted concerns about the trajectory of demand conditions in the U.S. economy in the wake of interest rate hikes cycle and elevated inflation. The U.S. S&P Global Manufacturing PMI grew to 48.9 in September from 47.9 in August, indicating that manufacturing sector business activity continues to contract. The Services PMI fell to 50.2 from 50.5 the previous month, while the Composite PMI dropped to 50.1 from 50.2.

Most Fed officials still expect the additional rate to rise later this year. Susan Collins and Mary Daly, presidents of the Federal Reserve Banks of Boston and San Francisco, emphasized that although inflation is cooling down, additional rate hikes would be necessary. Furthermore, Minneapolis Federal Reserve President Neel Kashkari said he would have thought with 500 basis points (bps) or 525 bps of interest rate increases as they would have slammed the brakes on consumer spending and it has not slammed the brakes on consumer spending.

Market participants will monitor Japan's Tokyo Consumer Price Index (CPI) for September, Industrial Production, and Retail Sales due on Friday. The key event this week will be the U.S. Core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of consumer inflation. The annual figure is expected to drop from 4.2% to 3.9%. Traders will take cues from these figures and find trading opportunities around the USD/JPY pair.

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Samantha Luan

Central Bank

Economic

Energy

Forex

Asian stock markets commenced the week with divergent performances. While Japan's Nikkei showed resilience, bouncing back after enduring its most challenging week this year, Hong Kong's stocks weren't as fortunate. The uncertainty surrounding China Evergrande Group's protracted debt restructuring initiative ignited a fresh wave of selling, impacting not just Evergrande but also its contemporaries. Consequently, apprehensions around the beleaguered property sector have once again come to the fore.

In the currency markets, mixed market sentiments have cast a shadow Australian and New Zealand Dollar, making them a tad softer. Swiss Franc seems eager to further its selloff from last week. Meanwhile, both Dollar and Euro, along with Canadian Dollar, show signs of firmness. British Pound is making an attempt at a comeback, but the momentum remains tepid. Meanwhile, the Yen is leaning on the softer end of the spectrum. As the week progresses, eyes will be keenly set on inflation data releases from Australia, Eurozone, and U.S., potentially guiding the subsequent moves in currency markets.

On the technical front, AUD/NZD's break of 1.0811 support last week argues that the consolidation pattern from 1.0721 has completed at 1.0914. That is fall from 1.1050 is ready to resume. Near term risk will stay on the downside as long as 55 D EMA (now at 1.0839) holds. Next target is 61.8% projection of 1.1050 to 1.0721 from 1.0914 at 1.0711. Aussie Dips as Evergrande Concerns Resurface; More Global Inflation Data Ahead_1

Aussie Dips as Evergrande Concerns Resurface; More Global Inflation Data Ahead_1

In Asia, at the time of writing, Nikkei is up 0.84%. Hong Kong HSI is down -1.24%. China Shanghai SSE is down -0.39% Singapore Strait Times is up 0.22%. Japan 10-year JGB yield is down -0.0142 at 0.735.

ECB's Villeroy: Patience is more important now

ECB Governing Council member Francois Villeroy de Galhau spoke about the current monetary policy outlook in an interview with France Inter radio on Saturday. Emphasizing the need for a patient approach, Villeroy stated, "From today's perspective, patience is more important than raising rates further."

He highlighted the current deposit rate, which stands at a record 4%. According to Villeroy, this level should be held steady as it plays a crucial role in controlling inflation within Eurozone.

Amid concerns over the potential inflationary impact of rising oil prices on the global economy, Villeroy remained steadfast in the ECB's commitment to its objectives.

"The recent increase in oil prices won't derail the European Central Bank's fight to tame inflation," he asserted. Elaborating further on this, he said, "We're very attentive, but [this] doesn't put into doubt the underlying disinflation."

Villeroy reiterated ECB's target: "Our outlook and engagement is to bring inflation to around 2% in 2025."

Oil's ascension pauses as momentum exhausted, but 100 still a possibility

The financial world was abuzz last week with discussions of oil potentially breaking the 100 mark. While some pundits deem this as a stretch, the consensus is that no one can entirely dismiss the possibility.

The recent spike in oil prices brings with it a myriad of concerns, particularly about its ripple effect on the broader economy. As central banks globally grapple to suppress rising inflation, the surge in energy costs, with gasoline taking the lead, is becoming a pressing issue. Notably, August's inflation readings surpassed expectations in several countries, with energy prices being the main instigator.

Tracing back to late June, energy prices have witnessed a consistent rise. This surge can be attributed to crude output reductions by major oil producers in OPEC+, coupled with additional cuts from Saudi Arabia. These decisions have propelled crude futures by approximately 30% over the past quarter.

With the possibility of OPEC+ announcing another surprise cut, bullish momentum could very well drive oil prices beyond 100. Contrarily, some anticipate that if prices climb above 95 per barrel, there might be a significant dip in demand, causing oil price to recalibrate and settle within a more balanced range.

From a technical perspective, WTI crude seems to have hit a near-term ceiling at 93.07 last week. Given that D MACD has already slid beneath the signal line, the prevailing bullish momentum may have been exhausted for the near term.

Nevertheless, decisive drop below 84.91 resistance turned support is essential to counteract the uptrend that began at 66.94. If this doesn't materialize, the prospects of a continued rally remain. Break of 93.07 will put key resistance level at 50% retracement of 131.82 to 63.67 at 97.74 into focus. Aussie Dips as Evergrande Concerns Resurface; More Global Inflation Data Ahead_2

Aussie Dips as Evergrande Concerns Resurface; More Global Inflation Data Ahead_2

Inflation data to stay in the global spotlight

Inflation continues to be the talk of global markets, as expectations and actual data often seem to dance around each other. Upcoming data from Australia, Eurozone, and U.S. are poised to play a pivotal role in the evolving narrative.

Australia's upcoming monthly CPI is projected to ascend from 4.9% yoy to 5.2% yoy in August. While this monthly figure doesn't encompass the full spectrum of the CPI – given that a significant chunk of the data is disseminated quarterly – it does offer vital cues for market players to recalibrate their anticipations. Present consensus leans toward RBA maintaining its current policy in October, especially as Q3 figures will remain undisclosed. The November decision, however, remains contentious. A Bloomberg poll depicts a divide among experts, with 18 forecasting another hike by the year's end and 17 foreseeing the status quo.

Moving to Europe, Eurozone's CPI flash is anticipated to register a deceleration, coming in at 4.5% yoy in September, a dip from the previous 5.2%. Core CPI might also reflect a decline from 5.3% yoy to 4.8%. Following ECB recent 25bps rate increase, the bank is inclined toward a sustained pause. Philip Lane, the bank's Chief Economist, underscored the adequacy of the current 4% deposit rate to realign inflation with 2% target within the projection horizon. This week's figures could fortify this perspective.

Across the Atlantic, U.S. core PCE inflation is projected to taper off to 3.9% yoy in August from the previous 4.2% yoy. Despite market skepticism, Fed's recent communiqué underscored the possibility of another rate hike this year. With the subsequent FOMC meet slated for November 1, a slew of pertinent data remains to be assessed prior to policy determinations.

In addition to the above, markets will be tuned into several other key indicators this week, including U.S. durable goods orders and consumer confidence, Germany's Ifo business climate, Canada's GDP, and Australia's retail sales.

Here are some highlights for the week:

Monday: Germany Ifo business climate.
Tuesday: Japan corporate service prices; U.S. house prices, new homes sales, consumer confidence.
Wednesday: BoJ minutes; Australia CPI; Germany Gfk consumer sentiment; Eurozone M3; U.S. durable goods orders.
Thursday: New Zealand ANZ business confidence; Australia retail sales; Germany CPI flash; ECB bulletin; U.S. Q2 GDP final, jobless claims, pending home sales.
Friday: Japan Tokyo CPI, unemployment rate, industrial production, retail sales, consumer confidence, housing starts; Germany import prices, retail sales, unemployment; UK Q2 GDP final, M4 money supply, mortgage supply; France consumer spending; Swiss KOF economic barometer; Eurozone CPI flash; Canada GDP; U.S. goods trade balance, personal income and spending, PCE inflation; Chicago PMI.

AUD/USD Daily Report

AUD/USD is staying in consolidation from 0.6356 and outlook is unchanged. Intraday bias remains neutral at this point. Further decline is expected as long as 0.6520 resistance holds. Break of 0.6356 will resume larger down trend to 100% projection of 0.7156 to 0.6457 from 0.6894 at 0.6195. Aussie Dips as Evergrande Concerns Resurface; More Global Inflation Data Ahead_3

Aussie Dips as Evergrande Concerns Resurface; More Global Inflation Data Ahead_3

In the bigger picture, down trend from 0.8006 (2021 high) is possibly still in progress. Decisive break of 0.6169 will target 61.8% projection of 0.8006 to 0.6169 to 0.7156 at 0.6021. This will now remain the favored case as long as 0.6894, in case of strong rebound. Aussie Dips as Evergrande Concerns Resurface; More Global Inflation Data Ahead_4

Aussie Dips as Evergrande Concerns Resurface; More Global Inflation Data Ahead_4

Source: ActionForex

To stay updated on all economic events of today, please check out our Economic calendar

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Danske Bank

Economic

Stocks

Bond

Forex

This week starts off with thin calendar in terms of data releases. In Germany, we receive the Ifo indicator for September. The assessment of the current climate has declined continuously since March and it will likely tick lower again. Expectations have stabilised in recent months, and it will be interesting to see if they actually increase a bit, which is what consensus is looking for.

We have seen modest moves in the global bond and equity markets this morning. U.S. Treasury yields rose very modestly from the long end of the curve. There have also been modest declines in the Asian equity markets this morning where the Chinese equity market is under pressure given the uncertainty surrounding the Chinese property market.

The main event today is the release of the German IFO indicator for September. We also get PPI from Finland and Spain and there are several ECB speeches from Villeroy, Schabel and Lagarde.

The main event this week will be the inflation data from U.S. and Euroland released on Friday. A downside surprise will be supportive for the bond market as the market will again speculate in faster rate cuts than is currently priced in after last week's central bank meetings where especially the Federal Reserve indicated "higher for longer" and the market priced out rate cuts and Treasury yields rose. However, with 2Y yields higher than 5%, short-dated bonds look attractive from the outright perspective.

Equities

Global equities were lower on Friday and hence failed to recover the lost ground from Thursday. Hence last week equities were lower 5 out of 5 days and the higher for longer narrative was dominating.

Higher-for-longer was driven by central banks and not least the updated summary of economic projections from Fed members. Inflation numbers were benign last week and oil prices were lower.

Higher-for-longer is not just a drag on the economy but is also leading to new discussions on the level of discounting factor and leading to long duration small caps underperforming.

On Friday in the U.S., Dow -0.3%, S&P 500 -0.2%, Nasdaq -0.1% and Russell 2000 -0.3%. Asian markets are mixed this morning with Japan outperforming once again. European futures are lower while U.S. futures are higher.

Last week was busy with several central bank meetings. One common theme was "higher for longer" as rate cuts are not coming in as fast as previously expected especially in the U.S., and 10Y U.S. Treasury yields have risen some 19bp during the week before declining 6bp on Friday. If the inflation data published on Friday surprises on the downside it should lead to a decline in yields and rates.

After a hectic central bank week, EUR/USD consolidates around 1.0650 following the Fed-induced one-figure drop.

GBP/USD continues its downward trajectory following the dovish surprise from BoE.

The JPY remains under pressure after BoJ left ultra-easy monetary policy unchanged.

Both SEK and NOK are modestly stronger vs EUR after the Riksbank's marginally dovish rate path was effectively balanced by the decision to start hedging the FX reserves and Norges Bank left a hawkish surprise in its rate trajectory.

This week has a lot to offer as well including U.S. and EA inflation numbers and interesting central bank speeches.

Credit

The credit markets ended the week on a marginally stronger footing with iTraxx main tightening 0.2bp to 77.3bp and Xover tightening 2.4bp to 416.7bp.

We expect a revival of the primary markets in the coming weeks with the central bank rate decisions now out of the way and ahead of the black-out periods.

Nordic macro

This week, August data in the form of PPI, trade balance, household lending and retail sales will be released and the implications for Q3 GDP assessed. Selling price expectations will be in focus what concerns the September confidence survey.

Riksbank's Jansson and Flodén will be talking about current monetary policy.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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