Next week is set to be another data-packed one with China PMI data, US non-farm payrolls and German factory orders among the highlights. Central bank meetings from the Reserve Bank of Australia and the Bank of England will also come in focus, particularly the Bank of England, which will publish its quarterly inflation report. But the US Fed may once again steal the limelight as several Fed officials, including Janet Yellen are due to speak next week.
Chinese manufacturing PMI will start the week on Sunday. The official manufacturing PMI is forecast to rise slightly to 50.0 in October from 49.8 previously. On Monday, the alternate Caixin manufacturing PMI – a private survey – is also expected to show manufacturing activity picking up, but at 47.5 it remains well below expansionary territory. Worse-than-expected readings would add pressure on the People’s Bank of China to stay on its current path of monetary easing.
The UK will also see the release of October PMI data, with manufacturing and construction PMI, out on Monday and Tuesday respectively, expected to worsen and only the services PMI showing an improvement when released on Wednesday. The big mover for the pound though is likely to be next Thursday’s Bank of England monetary policy meeting, with the simultaneous release of the meeting minutes and the latest quarterly inflation report. No change in policy is expected but it will be interesting to see whether the MPC’s outlook on growth and inflation has changed from the recent events in China and in financial markets, and whether the Governor, Mark Carney will sound a more hawkish tone following the Fed’s more upbeat message at its October 28 meeting. Manufacturing and industrial production data out on Friday are expected to show monthly outputs slowing in September.
In the Eurozone, the final PMI numbers are released for October where no revision is expected. German factory orders on Thursday and industrial production figures on Friday are likely to be more significant though. German factory orders are forecast to bounce back by 1% m/m in September after falling by 1.8% in August. Industrial production is also expected to improve, rising by 0.5% m/m.
The Bank of Japan may shed more light on the prospects of further monetary stimulus when it publishes the minutes from this week’s meeting next Thursday. The Bank has adopted a wait-and-see approach and has refused to signal further monetary easing even as inflation undershoots its target. This has helped the yen appreciate slightly since late summer. However, the language of the minutes may provide some clues on the likelihood of future easing.
In the US, a flurry of data will keep the dollar in focus ahead of next Friday’s jobs report. Before that though, the ISM manufacturing index will be closely looked at on Monday, which is forecast to fall to 50.0 in October, indicating manufacturing activity came to a standstill in October. Factory orders are expected to fall for the second straight month by 0.9% in September when released on Tuesday. Wednesday will see some key data in the form of ADP employment change for October, trade figures for September and the ISM non-manufacturing composite for October. But Fed Chair Janet Yellen’s testimony before the House Committee on Financial Services could prove an attention grabber when she gets quizzed by the Committee. A speech by New York Fed President William Dudley will also be closely watched later in the day. On Thursday, a number of Fed officials including Fisher, Tarullo and Lockhart are due to speak. Wrapping up the week on Friday will be the October nonfarm payrolls, which are expected to rise by 178k, versus 142k in September. This is only a modest improvement and below the 200k plus numbers seen in the first half of the year. However, average hourly earnings are expected to edge up slightly to 2.3% in an encouraging sign for the Fed looking for more concrete signs of inflationary pressures.
Finally, the Reserve Bank of Australia will hold its policy meeting on Tuesday where no change is expected in the cash rate. The falling Australian dollar has aided the central bank in rebalancing the Australian economy away from mining exports but the tone of the accompanying statement will be key in assessing the RBA’s intentions.