Private market research firm IHS Markit will release UK manufacturing purchasing managers’ index (PMI) data for October. Economists expect the growth pace to be in line with preliminary data, which came in at 57.7.
ISM Manufacturing PMI
In the US, the Institute for Supply Management (ISM) will also release its manufacturing PMI figure for October, which is expected to slow down to 60.5 from 61.1 in September.
BOJ Monetary Policy Statement
Bank of Japan’s (BoJ) Monetary Policy Statement will discuss the result of the central bank’s decision on asset purchases. It will also contain a commentary about the economic conditions that influenced the decision.
RBA’s Interest Rate Decision & Rate Statement
Also in Asia, the Reserve Bank of Australia (RBA) will reveal the interest rate decision. While most economists anticipate no change in the rate, currently at a record low of 0.1%, the main focus will be on the central bank’s economic outlook and forward guidance.
AUD/USD is currently trading at the highest since July, and any hawkish signal from the RBA can further contribute to the Aussie’s rally.
German manufacturing PMI
Tuesday will be more boring in terms of relevant fundamentals, but make sure to keep an eye on Germany’s manufacturing PMI figure for October, which will impact the EUR/USD pair.
Composite PMI + Servies PMI
Research firm IHS Markit will release the UK’s services PMI as well as the Composite PMI, which touches upon the services and manufacturing sectors. This will give investors an idea about the UK GDP growth in the final quarter of the year.
European Union’s Eurostat will provide an update on the unemployment rate, which is expected to have declined in September to 7.4% from August’s 7.5%. This can be the fifth consecutive month of improvement in the unemployment rate.
ADP Nonfarm Employment Change
It will be a busy day for the US dollar. The ADP research institute will release its nonfarm payrolls report, which has a visible impact on the US dollar but often fails to accurately anticipate the official Nonfarm Payrolls figure published by the government on Friday.
Markit Composite and Services PMI / ISM Non-manufacturing PMI
IHS Markit and the ISM will independently report on the October performance of the US services sector, which accounts for more than two-thirds of the GDP. The former will also release the Composite PMI.
Interest rate decision
The main event of the week will be the Federal Reserve’s interest rate decision following a two-day meeting. Although it is clear that the central bank won’t touch the rate at all this year, investors and economists expect that it will start tapering the bond-buying program. The Fed may begin with a reduction of $10 trillion per month, which is expected to be completed by June next year.
The major question is – when will the rate hikes follow? Since September’s FOMC rate decision, investors have been pricing in a more hawkish Fed, especially amid high inflation. As of now, economists anticipate 2 rate hikes by the end of 2022. Before the September policy announcement, not even one rate hike was anticipated.
FOMC statement & Press conference
Investors will pay close attention to the FOMC’s statement following the interest rate decision as well as Powell’s comments during the press conference. The Fed has consistently argued that the high inflation was transitory – will the rhetoric change next week?
BOE Interest rate decision
On Thursday, the main focus will be on the Bank of England (BoE), which will decide whether to increase the interest rate to 0.25% or leave it at a record low of 0.1%. The BoE is widely expected to become the first major central bank that considers a rate hike earlier than anyone else, although it may wait until next year to increase the rate. We discussed the implications of the BoE’s decision in our recent article on the pound.
While most investors are expecting a rate increase, economists predict no change for now.
Bloomberg economists said:
“There’s a fierce debate raging on the Monetary Policy Committee about whether to raise interest rates next week. Financial markets think it’s a done deal, thanks to a series of hawkish interventions by Governor Andrew Bailey. We’re less sure.”
The US Labor Department will release its weekly report on initial applications for unemployment benefits, with analysts expecting a slowdown to 275,000 new claims after 281,000 applications in the previous week.
Nonfarm Payrolls and Unemployment Rate
Every first Friday of the month, the US Labor Department releases the Nonfarm Payrolls report, which is one of the most important events for the US dollar. Economists anticipate a strong rebound in hiring after two consecutive disappointing months of job growth. The number of COVID-19 cases has declined in October, enabling leisure and hospitality sector to boost hiring, although employment growth might have been capped by a limited supply of workers.
Bloomberg analysts anticipate that payrolls had increased by 450,000, more than twice as much as in September. The unemployment rate is likely to have declined to 4.7% from 4.8%.
As you could expect, upbeat job data would provide much support for the US dollar, pushing the USD Index closer to the recent one-year high.
Canada will also release its employment change figure for October, so the last trading day of the week will be highly volatile for the USD/CAD pair, which has lost over 2% over the month on surging oil prices.
Economists expect the Canadian economy to have added 50,000 new jobs in October after a job growth figure of over 157,000 in September.
A few hours later, investors will find out Canada’s Ivey PMI reading for October.