On Tuesday, for the Euro we have the German preliminary CPI m/m and for the U.S. the CB consumer confidence and JOLTS job openings.
This will be followed by the ADP non-farm employment change on Wednesday, ISM manufacturing PMI on Thursday and the NFP, average hourly earnings m/m and unemployment rate on Friday. The Swiss CPI m/m will land on Thursday.
Aside from these events, some Fed members are also expected to deliver their remarks this week. These include Barkin, Mester, Williams and Bostic.
Fed Chair Jerome Powell delivered a direct and hawkish message Friday at the Jackson Hole Symposium and highlighted that the Fed's primary goal is to bring inflation back to its 2% target. He suggested that it might be necessary to keep the rate higher for an extended period of time in order to ensure this.
A lot of important data for the eurozone will be released this week with August inflation taking the spotlight on Wednesday and the unemployment rate on Thursday. Inflation is expected to run hot again and this will be on everyone's minds as the next ECB meeting is approaching.
At the Jackson Hole Symposium Isabel Schnabel warned that a larger "sacrifice" and tighter policy is required to keep inflation under control and not risk runaway price growth. She and François Villeroy de Galhau stressed that the European monetary policy would also have to remain tight for an extended period of time.
The BOJ Governor, Haruhiko Kuroda, pointed out why Japan will not tighten its monetary policy aggressively. "We have no choice other than continue monetary easing until wages and prices rise in a stable and sustainable manner," he said, estimating that inflation in Japan will approach 3% this year but will decrease back towards 1.5% next year. The situation is a bit different in Japan compared to other developed countries, as inflation is not rising at the same aggressive pace.
For the U.S., the ADP Employment report will be back on August 31st after a change of methodology that aims to provide a more robust view of the labour market and economic growth trajectory.
The Swiss inflation data is eagerly awaited as it can provide clues about what might happen at the next SNB meeting. SNB Chairman Thomas Jordan spoke Saturday at the Jackson Hole Symposium and reiterated that changing the definition of price stability from the current "rise in consumer prices of less than 2% per year" is not needed.
Last week the Swiss GDP showed an increase by 0.5% q/q for Q1, and analysts believe a similar growth in Q2 is possible. It is also likely that the Eurozone recession will limit Switzerland's near-term prospect for economic growth.
For the U.S., the ISM manufacturing index has lately been signalling an economic slowdown. The Fed is trying to slow the economy just enough until the inflation returns to normal territory, so according to Wells Fargo, the perfect scenario this week would be another decline in the ISM’s prices paid component, while new orders, production and employment components are expected to show some resilience.
After a favourable NFP last month traders will be watching this week's print with a lot of interest. A rise by 295K is the consensus for August. The NFP along with next week's inflation data could determine whether we'll have a rate hike of 50 bps or 75 bps at the next FOMC meeting.
The unemployment rate is expected to remain unchanged at 3.5%, but if the NFP prints much higher than expected and the wage number also sees a consecutive 0.5% m/m increase, or higher, a rate hike of 75 bps becomes more likely.
GBP/CHF expectations
Last week the pair was in a consolidation phase until Friday when the CHF showed some strength. The inflation data is a key aspect to watch this week. On the H1 chart the pair closed the week near the 1.1315 level of support. At this point the trajectory of GBP/CHF is a bit uncertain, but it still has room to depreciate until the end of the month targeting 1.1165 -- the March 2020 low. On the upside the next level of resistance is at 1.1415 and if that level doesn't hold the next one is at 1.1480.
CHF/JPY expectations
The pair looks good for buying opportunities as we have a divergent monetary policy between the SNB and the BOJ. On the H1 chart a correction is expected until 142.00 which is the next level of support. If rejected, the pair could test the resistance at 143.60 or even 144.00.
On the downside the next level of support is at 140.75. Bear in mind that the CHF inflation data could be a risk for this trade, so keep an eye on it.
This article was written by Gina Constantin.