It’s shaping up to be a busy week for markets with the final Federal Reserve meeting on the slate for Wednesday. The Bank of England (BOE) is due to hold a rate-meeting and release minutes, with investors keen to see if it will go down the negative-rate route.
Continuing the central banks trend, the Bank of Japan is also due to reach a rate decision after recent gross domestic (GDP) data showed that the Japanese economy contracted 7.9% in the second quarter.
The Organisation for Economic Co-operation and Development (OECD) will release its latest economic outlook report for the world economy and the G20, on Wednesday.
Brexit drama is sure to continue after talks reached a boiling point, after the UK announced it would renege on parts of the Withdrawal agreement.
As ever, coronavirus is in the spotlight as many countries and cities grabble with second lockdowns as well as quarantine travel restrictions. Portugal and Hungary are the latest countries to be added to England’s and Northern Ireland’s travel quarantine lists.
Britain: Brexit, BOE and a host of economic releases
Markets and the pound will be braced for more Brexit drama as talks are set to resume following an impasse between the two sides.
On Monday, the internal Market Bill will be debated in the Commons for the first time and Britain will resume informal talks with the EU, while the ninth round of official Brexit talks will kick off on 28 September, so far the eight rounds have yielded little success.
The UK proposes a bill which could grant powers to override parts of the Withdrawal Agreement, particularly in relation to state aid.
READ MORE: Brexit: Key facts ahead of next week’s talks
Brussels’ focus will be on the legal side of things and whether the House of Lords will block the bill containing provisions which could breach international law.
On Saturday, prime minister Boris Johnson, told the EU to take their “threats off the table,” on Twitter.
Writing in the Telegraph, Johnson said the UK was seeking a similar free trade agreement like the one between the EU and Canada. The PM also said a bill which could breach a divorce treaty with the bloc was needed to protect the UK’s integrity.
While no change in monetary policy is expected from BOE’s meeting, investors will watch what the bank’s next move will be, whether it will signal a more cautious outlook, and for any hints of additional stimulus in the pipelines. However, BOE could extend its bond-buying to help the UK economy amid COVID-19 and Brexit,
A plethora of ONS data is also due over the week, with retail sales, readings on consumer prices, house price data for June, July unemployment data and inflation figures for August.
Key company results to watch out for:
Ocado (OCDO.L)— trading update (Tuesday)
Other events: On Wednesday, British Airways (BA) boss will be grilled by MPs over jobs cuts, Alex Cruz is due to give evidence to the Transport Select Committee.
US: Federal Reserve is once more the star of the show
Monetary policy is unlikely to budge in the near term, with Fed chair Jerome Powell saying in a recent speech at the Jackson Hole convention that focus will be on implementing a new policy of average inflation targeting (AIT).
The Fed has already concluded their strategy review which means policymakers would be prepared to tolerate prices rising above 2% for periods of time, to compensate for when inflation is running below target. It implies that interest rates will be lower for longer as the central bank will not pre-emptively raise rates before inflation hits 2%.
US retail sales and consumer confidence data is also on the cards to see whether the country’s economy continues to recover from coronavirus lockdown measures in April.
But, the expiry of the $600 (£478) a week unemployment top-up could impact spending patterns for this month — particularly since consumer confidence fell sharply to 84.8 — its lowest level since mid-2014.
Tech giant Apple (AAPL), is expected to unveil a host of new products and updates on Wednesday when it holds a major event titled ‘Time Flies’. This comes after a tech stocks sell-off on Wall Street spooked global markets last week. The tech-heavy Nasdaq index (^IXIC) fell as much as 5%.
There is speculation that Apple will release the iPhone 12, updates to iPad and Apple Watch. The company which is valued at $2trn, recently split its shares to make it more affordable and available for traders.
EU: Industry figures to lift Eurozone recovery spirits
It a quiet week for the Eurozone economy, July industry data releases will see whether recovery is in a favourable light, as manufacturing PMI outperformed services in August.
Investors will also watch Wednesday’s trade data for July after countries reopened following the coronavirus lockdowns.
Last week, the ECB kept rates on hold and did not seem too concerned by a stronger euro from an inflation perspective.
“The Governing Council discussed the appreciation of the euro, but as you know we don’t target the exchange rate,” ECB President Christine Lagarde said in a press conference Thursday.
Elsewhere: Japan is set to choose a new prime minister after Shinzo Abe announced that he would be stepping down due to health issues. Yoshihide Suga is predicted to be elected and is expected to deliver a continuation of Abe’s policies. Meanwhile, the Bank of Japan is also set to release its rates-decision on Thursday, although no change is expected in its policies of low rates and buying of a broad range of securities.
China: A barrage of economic indicators are due for the country on Tuesday, with retail sales growth not the same since it emerged from lockdown at the end of February. Although optimism over the July numbers rose due to recent positive data from the auto sector, as well as reports from the likes of Daimler (DAI.DE) and Apple (AAPL) about rebounds in their Chinese markets.