Business

Raft of eurozone survey results due this week

In its much-anticipated September meeting, the Fed erred on the side of caution and left interest rates on hold. It was clear that the risks posed to the US economy from recent global macro and financial market developments was a key determining factor in this decision.

But most committee members still expect that economic conditions will 'make it appropriate' to raise interest rates 'later this year'. Although, the number of participants with this view has fallen to 13 (from 15 in June) of the 17 committee members, with the Fed appearing to be split on when to hike interest rates.

The Fed is still indicating a more aggressive path of rate increases than the market is currently expecting. Market pricing at the moment suggests that the first full 25bps rate hike is not expected until next spring.

The market is looking for the Fed funds rate to rise to 0.75 per cent by end 2016, below the Fed’s projection of 1.375 per cent. There was a ‘dovish’ interpretation from markets to the meeting with the dollar weakening across the board.

Data-wise, this week’s US schedule may not offer much new insight with the schedule lacking in top tier data. Durable goods for August is the main release of note. They are expected to decline after having picked up strongly in the last couple of months.

On the housing market, new and existing home sales are forecast to remain at very encouraging levels. We also get some timelier updates in the form of the flash Markit PMIs (manufacturing & services) for September. They should suggest that the US economy remained solid in the third quarter. A speech by Fed chair Janet Yellen on Thursday will be looked to for further insights into the aforementioned policy decision.

In contrast to the US, the eurozone calendar contains some noteworthy releases, with a raft of key September surveys due. They will be looked to for an indication of how the economy is performing as quarter three comes to a close.

The composite PMI is forecast to improve, indicating that the Eurozone maintained its modest pace of growth in the third quarter. Meanwhile, Flash EC consumer sentiment is anticipated to confirm a slightly weaker tone to sentiment in Q3.

The closely watched German Ifo index for September is likely to indicate that growth in the eurozone’s largest economy remained steady in Q3. Meanwhile, the French INSEE index has been firmer recently and with another solid reading expected in September, it should suggest an improved performance by the French economy in Q3 after growth stalled in Q2.

In terms of monetary policy, ECB President Draghi’s appearance before the EU Parliament tomorrow will bear watching, given speculation of possible further policy easing.

In the UK, the calendar is very sparse. Public finance data for August is the only release of note, with borrowing forecast to have increased in the month.

Bank of England Governor MArk Carney is on the speaking circuit on Wednesday. Finally, the Chinese manufacturing PMI for September is anticipated to provide further evidence of a slowing economy.