FX Week Ahead – Top 5 Events: China Manufacturing PMI; Eurozone Inflation Rate; Canada GDP; US ISM Manufacturing; US NFP

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FX Week Ahead Overview:

  • The final days of August and early days of September will feature a smattering of growth, inflation, and jobs data from Europe and North America.
  • The calendar is relatively quiet at the beginning of the weak, most dense on Wednesday, and then tapers off again into the end of the week.
  • The August US jobs report is the highlight of the week, due out on Friday.

For the full week ahead, please visit the DailyFX Economic Calendar.

08/31 WEDNESDAY | 01:30 GMT | CNY NBS Manufacturing PMI (AUG)

The Chinese economy continues to struggle as government-mandated zero-COVID policies continue, with 2Q’22 Chinese GDP at its lowest level since the onset of the coronavirus pandemic. Amid the struggle for the world’s second largest economy, Chinese policymakers have cut interest rates several times to help spur growth – but the impact is likely not yet seen. The August China NBS manufacturing PMI reading is set to come in at 49.2 from 49, suggesting that contraction remains afoot, if only at a slightly moderated pace.

08/31 WEDNESDAY | 09:00 GMT | EUR Inflation Rate (HICP) (AUG)

With European gas prices surging in recent weeks, it’s unlikely that the Eurozone saw any reprieve on the inflation front in August. According to a Bloomberg News survey, the flash August Eurozone inflation rate is expected at +0.3% m/m from +0.1% m/m and +9% y/y from +8.9% y/y, while the core reading is due in at +4.1% y/y from +4% y/y. Inflation remains stubbornly high and appears set to accelerate in forthcoming readings, which is why European Central Bank policymakers have been publicly discussing the potential for a 75-bps rate hike in September.

08/31 WEDNESDAY | 12:30 GMT | CAD Gross Domestic Product (2Q)

The initial 2Q’22 Canada GDP report came in at +4.6% annualized, but the upcoming revision is likely to lower the projected pace of growth. According to a Bloomberg News survey, the revised 2Q’22 Canada GDP growth rate is forecast at +4.4% annualized. It will be a potentially immaterial revision, as the Bank of Canada, according to Canada overnight index swaps (OIS), is projected to raise their main rate by 75-bps to 3.25% in September.

09/01 THURSDAY | 14:00 GMT | USD ISM Manufacturing PMI (AUG)

The US economy has clearly slowed down in recent months, but is it just a slowdown or a full blown recession? The upcoming August US ISM manufacturing PMI may help provide some more color to that answer. According to a Bloomberg News survey, the manufacturing gauge is due in at 52 from 52.8, which is a deceleration but still in growth territory. A revision to the Atlanta Fed GDPNow growth tracker for 3Q’22 US GDP is expected afterwards; the reading currently resides at +1.6% annualized.

09/02 FRIDAY | 12:30 GMT | USD Nonfarm Payrolls & Unemployment Rate (AUG)

Even as US recession concerns swirl, the US labor market has remained resilient. According to a Bloomberg News survey, the US economy added +300K jobs in August from +528K jobs in July, with the US unemployment rate (U3) holding at 3.5%. The US participation rate is expected to edge higher to 62.2% from 62.1%, while US average hourly earnings are anticipated to come in at +5.3% y/y from +5.2% y/y.

According to the Atlanta Fed Jobs Growth Calculator, the US economy needs +343K jobs growth per month over the next 12-months in order to return to the pre-pandemic US labor market of a 3.5% unemployment rate (U3) with a 63.4% labor force participation rate.

It remains the case that ‘good news is bad news’ for risk assets as the Fed Chair Jerome Powell has reiterated the FOMC’s policy stance: a strong US labor market report could further reinvigorate Fed rate hike odds, which are discounting a 62% chance of a 75-bps rate hike in September.

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— Written by Christopher Vecchio, CFA, Senior Strategist

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