This week will most probably be the highlight for September; so far Sterling is in a good position as of the close on Friday, and we have a few releases through the week before we get to the Central bank meetings. On Monday we have Eurozone balance of trade data which is expected to be a lot lower at 14.9B- this mostly may be down to seasonality of trade, so I am not expecting much movement on the market on this release- but it does show that activity has been slowing down in Europe.
On Tuesday we have both German and European ZEW economic sentiment data released, expectations are a sharp drop in both, and though it is only an index, it is a pretty important one, so I can see the Euro potentially taking a hit on this release- good for GBPEUR and bad for EURUSD. Later we have Canadian CPI data which is expected to fall to 2.3%, showing that rate cuts are the right decision for Canada and that everything is going to plan- this will be positive for the CAD. Later we have U.S retail sales which is expected to lower at 0.3%, this will be negative for the USD so we may potentially see GBPUSD rise on Tuesday afternoon following this release. This will be shortly followed by U.S industrial and manufacturing production data all of which is expected weaker.
On Wednesday we begin a busy day with UK inflation data, the expectation is that the yearly number goes up to 3.5%, this will not be welcome news from the BoE and the UK Government due to all the work that has gone into bringing inflation lower- this could well affect the BoE decision on Thursday if it does come out this way. Later we have Eurozone CPI data where we are expecting to see 2.8% down from 2.9%, which will be positive for the Euro, potentially meaning that a cut in October may not be necessary. Lastly, in the evening the Fed will be cutting interest rates, the questions is whether they cut by 25 or 50 bps- the path after this is unclear, it seems a 25 bps cut is more likely and potentially this will be good for stocks and mean that GBPUSD goes higher, we will have to see what happens on Thursday but that is my initial prediction- it will probably be a sell the news event at first and then we may see strength in markets on Friday morning.
On Thursday the main event is the Bank of England meeting where currently there is NO cut expected- if the BoE decide to hold rates this is positive for Sterling and we could see markets move up, however if they decide to cut rates instead then I expect to see the Pound weaken. It seems likely that the BoE is waiting for the Government to do their budget in October before making a move, but it is a 50% risk on Thursday of a cut so I would advice being nimble on any transactions that day.