After the ECB announced stimulus plans last
week, financial markets will be closely watching the meetings of major central
banks this week to see the direction of monetary policy in the coming period
and its impact on major currencies.
The Chinese government will also release data
on industrial production and retail sales, which are usually of great
importance, especially as the trade war between China and the United States continues.
Markets will also keep up with the latest
developments in the trade standoff between the U.S. and China, with tensions
easing recently.
Fed rate decision to shape dollar’s trajectory
The Federal Reserve will meet this week to
determine the interest rate and monetary policy trajectory according to the
latest developments in the US economy, and under the continued pressure from U.S.
President Donald Trump to cut interest rates.
Fed members are expected to vote in favor of a
rate cut to 2.00 per cent from the current 2.25 per cent.
The recent decline in U.S. economic data, the
potential negative impact of the trade war with China and the decline in global
growth, as well as Trump pressure and ECB action, are sufficient reasons to prompt
the Fed to cut its borrowing cost.
In case of a more-than-expected rate cut or the
Fed's preparation for further rate declines in the coming period, the greenback
will probably be negatively affected.
Investors will also follow the press conference
of Fed Chair Jerome Powell, as he will comment on the Fed’s interest rate,
growth, inflation and unemployment forecasts in the US economy.
Pound will attempt to resume rebound
The pound continued to rise against the U.S.
dollar, climbing to a seven-week high last week, on lower expectations that Britain
would exit the European Union at the end of October without an agreement.
The highlight of this week will be the Bank of England
meeting which is expected to hold monetary policy, especially after the release
of strong UK labor market data and amid growing optimism that the no-deal Brexit
scenario can be avoided.
As for the economic reports, the most important
this week are the U.K. inflation and retail sales reports, but the eyes will
remain open to the melting political situation within the British Parliament.
Analysts expect retail sales to fall 0.2
percent in August after a 0.2 percent rise in July.
The consumer price index, the BoE’s preferred inflation
gauge, may experience a retreat to 1.8 percent in August year-on-year from 2.1
percent recorded in July.
Euro may follow the general sentiment
This week, the euro will likely be moving with the
general market sentiment due to the absence of significant economic data from
the euro zone.
The most notable report is the final euro-area
CPI reading for August, which is expected to stabilize at 1.0 percent year-on-year.
Gold looks for support from Fed
Gold declined last week despite the ease in trade
tensions between the United States and China, but prices remained above the
psychological level of $1,500 an ounce as it benefited from the dollar's drop at
the end of last week.
Gold prices will depend this week on the
Federal Reserve's interest rate decision, noting that a more-than-expected rate
slash by the Fed could push gold prices higher.
As for oil, prices fell by the end of last week
amidst concerns over a slowing global economy and as oil demand outweighed
progress in the US-China trade dispute.
Last week's US government crude inventories report,
which indicated a larger than expected decline in US crude stockpiles by 6.9
million barrels in the week ending September 6, was unable to provide
sufficient support for oil prices.
Chinese data and the economic outlook for the US economy by the Fed
could significantly affect oil prices this week.
