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The week ahead: 5 things to watch on the economic calendar

Economy Sep 03, 2017 10:14
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© Reuters. 5 things to watch on the economic calendar in the week ahead - Global financial markets will focus on this week's European Central Bank meeting for fresh clues on when the central bank will shift away from its ultra-easy policy.

Meanwhile, in the U.S., a report on service sector growth will be the highlight of the holiday-shortened week. U.S. markets will remain closed on Monday for Labor Day.

In the U.K., traders will focus on a pair of reports on construction and service sector activity for further indications on the continued effect that the Brexit decision is having on the economy.

Elsewhere, China is to release monthly trade and inflation data amid recent signs that momentum in the world's second largest economy remains strong.

A monetary policy announcement from the Bank of Canada will also be in focus.

Ahead of the coming week, has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. European Central Bank policy meeting

The European Central Bank's latest interest rate decision is due at 1145GMT (7:45AM ET) on Thursday with no major policy changes expected.

Most of the focus will be on President Mario Draghi's press conference 45 minutes after the announcement, as investors look for more clues on when and how the ECB could start unwinding its massive quantitative easing program.

Announcing new staff forecasts, he will likely upgrade the ECB's growth outlook and reduce inflation projections but only slightly. He is also expected to announce that the ECB's technical committees have been tasked with mapping policy options, a signal that a decision to scale back stimulus is imminent.

Having already expressed concern about the rise of the euro in July, policymakers may also repeat their warning about the currency moving too quick.

Market experts believe the central bank is likely to wait until October before announcing a tapering of its €60 billion of monthly asset purchases.

2. U.S. ISM services PMI

The U.S. Institute of Supply Management is to release data on August service sector activity at 10:00AM ET (1400GMT) on Wednesday. The gauge is expected to inch up 1.4 points to 55.3. Anything above 50.0 signals expansion.

The data takes on extra importance after the ISM manufacturing survey published last week soared to the highest level since April 2011.

Besides the services PMI, the coming holiday-shortened week could be a relatively quiet one with the Fed's Beige Book also in focus.

Staying on the central bank front, this week will see comments from a handful of Fed speakers including influential New York Fed President William Dudley, Governor Lael Brainard, Dallas Fed President Robert Kaplan, Minneapolis Fed chief Neel Kashkari and Philadelphia President Patrick Harker.

Markets remain skeptical the Fed will raise rates a third time this year due to worries over the subdued inflation outlook, but it is widely expected to start the process of reducing its balance sheet sometime this fall.

Investors are also likely to continue to fret over the latest headlines coming out of Washington.

3. UK PMIs

The U.K. will release readings on August construction sector activity at 0830GMT (4:30AM ET) on Monday, followed by a report on the service sector on Tuesday.

The construction PMI is forecast to tick up to 52.0 from 51.9 a month earlier, while a survey on Britain's giant services sector is forecast to inch down to 53.5 from 53.8 last month.

The U.K. will also produce a report on July manufacturing production at 0830GMT (4:30AM ET) Friday.

Some BOE policymakers have started to call for higher interest rates in the months ahead due to the recent surge in inflation, which was caused largely by the plunge in sterling following last year's Brexit vote.

But a recent run of weak data and deep uncertainty about the impact of Brexit on the economy have cooled the speculation that the BOE is poised to start removing its crisis-level stimulus.

4. China trade figures

China is to release August trade figures at around 0300GMT on Friday. The report is expected to show that the country’s trade surplus widened to $48.6 billion last month from a surplus of $45.7 billion in July.

Exports are forecast to have climbed 5.1% in August from a year earlier, following a jump of 7.2% a month ago, while imports are expected to rise 10.0%, after increasing 11.0% in July.

Additionally, on Saturday, the Asian nation will publish data on August consumer and producer price inflation. The reports are expected to show that consumer prices rose 1.6% last month, while producer prices are forecast to increase by 5.4%.

China's economy grew a faster-than-expected 6.9% in the second quarter, matching the first quarter's pace, supported by solid exports, industrial production and consumption.

5. Bank of Canada rate decision

The Bank of Canada's interest rate decision is due at 10:00AM ET (1400GMT) on Wednesday, with most experts expecting the central bank to hold its benchmark rate at 0.75%.

The BOC hiked rates for the first time in seven years at its previous meeting in July and left the door wide open to further moves.

Investors are fully pricing in at least one more rate increase by the end of this year, and at least one more in 2018.

The odds of a hike as early as this week jumped to 41% after data late last month showed Canada's economy accelerated at a 4.5% pace in the second quarter, tops among Group of Seven nations.

Most economists, however, still expect the next rate hike to come at the bank's October meeting.

Besides the BOC, market participants will focus on monthly trade figures, as well as the closely-watched jobs report.

Stay up-to-date on all of this week's economic events by visiting:

The week ahead: 5 things to watch on the economic calendar

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