The US dollar, British pound, and Canadian dollar are all anticipated to face data indicating further declines in inflation growth. However, the bigger market-movers may be the US retail sales report and the Swiss National Bank’s rate decision, especially because the central bank has been quite liberal in their discussion of FX intervention.
• UK Consumer Price Index (AUG) – September 15, 4:30 ET
The UK’s consumer price index (CPI) reading for the month of August is expected to rise 0.3 percent, but the more important part of this report is that the annual rate of growth, which is more closely watched by the Bank of England, is forecasted to fall to 1.4 percent, the lowest since October 2004, from 1.8 percent, keeping inflation within the central bank’s acceptable range of 1 percent - 3 percent, but below their 2 percent target. If CPI falls more than projected, the British pound could pull back sharply as the markets will anticipate that the BOE will expand their quantitative easing efforts even further before year-end. On the other hand, if CPI holds strong, the currency could rally in response.
• US Advance Retail Sales (AUG) – September 15, 8:30 ET
The Commerce Department is forecasted to report that US retail sales jumped 1.8 percent in August, which would mark the biggest monthly rise since January 2006, led by increased auto and gas station sales. Indeed, as the deadline for the “cash for clunkers” program neared on August 24, eligible buyers likely rushed to take advantage of the deal. Furthermore, this index is not adjusted for inflation, so the steady rise in average gasoline prices during the month should contribute to overall gains. That said, excluding items like autos and gas, advance retail sales are projected to edge only 0.1 percent higher, following 5 consecutive months of contraction, and there may be even greater upside potential due to “back to school” shopping. Measures of consumption could start to deteriorate once again in September, though, as the impact of the “cash for clunkers” program fades and as unemployment continues its steady ascent. Nevertheless, if the August reading of US advance retail sales reflects strong results, the US dollar could rally in response.
• US Consumer Price Index (AUG) – September 16, 8:30 ET
As seen in the release of the US import price index, a rise in petroleum costs may push the headline consumer price index (CPI) up 0.3 percent in the month of August, while the annual rate could edge up to -1.7 percent from -2.1 percent. On the other hand, the annual rate of the core CPI, which excludes volatile food and energy prices, is projected to fall to 1.4 percent, the lowest since February 2004, from 1.5 percent. Such moves would likely be disconcerting to the Federal Reserve, as it would suggest that the broad decline in demand is now the prime driver of price declines, which could force the central bank to keep their extraordinary liquidity measures in place for longer than previously expected.
• Canadian Consumer Price Index (AUG) – September 17, 7:00 ET
The annual rate of Canadian headline CPI growth for August is projected to edge up to -0.6 percent from -0.9 percent, but on the other hand, the Bank of Canada’s core measure is projected to ease back to a one-year low of1.6 percent from 1.8 percent. Such results would suggest that price declines are less the result of falling commodity costs and instead, downward pressures are starting to come into play for prices throughout the broader economy. The Bank of Canada said in their most recent policy statement that “overall risks to its inflation projection are tilted slightly to the downside,” and if we start to see even core measures of inflation fall toward zero, the Canadian dollar could pull tumble.
• Swiss National Bank Rate Decision – September 17, 8:00 ET
The Swiss National Bank is likely to leave their 3-month LIBOR target range unchanged at 0.0 percent - 0.75 percent, but the thing to watch for in the SNB’s subsequent policy statement is talk of FX intervention. The central bank reiterated during their last meeting in June that they would “take firm action to prevent an appreciation of the Swiss franc against the euro,” but 1.50 has really proven to be the one point in EURCHF to prompt them to take action. Overall, if the SNB takes a more aggressive stance on the issue this week, EURCHF could easily surge higher, but if the bank drops their statements on the topic altogether, the Swiss franc is likely to surge across the majors.
See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.
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