Week Ahead for FX, Bonds: U.S. Data in Focus as Investors Gauge Pace of Future Rate Cuts

By Dow Jones Newswires staff

Below are the most important global events likely to affect FX and bond markets in the week starting September 22.

U.S. economic data, including PCE inflation, purchasing managers' surveys and durable goods figures will be closely monitored as investors assess the likely pace of interest-rate cuts in the coming months after the Federal Reserve reduced rates at its September meeting.

In Europe, eurozone and U.K. provisional purchasing managers' data will give a snapshot of how economies have fared so far this month. Interest-rate decisions are due from Switzerland and Sweden. Mexico also announces a rate decision.

In Asia, fresh inflation readings will be front and center of investors' minds, alongside central-bank moves from China. The People's Bank of China sets its loan prime rates amid continuing growth concerns. Price trends from Australia, Singapore, Malaysia and Japan's capital will offer further clues into monetary policy outlooks in the region.

U.S.

After the Federal Reserve resumed interest-rate cuts this month, focus will now turn to data on the economy and on inflation for clues on how fast rates could fall from here.

Friday's figures for August PCE inflation, the Federal Reserve's preferred measure of inflation, will be a key focus for the week as investors continue to gauge the extent to which tariffs have pushed up inflation. If evidence continues to suggest that this impact is limited then this could be seen as clearing the path to more rate cuts.

After recent data pointing to a deteriorating U.S. labor market, investors will also be looking to see if there is any further evidence of worsening economic activity.

Provisional purchasing managers' surveys for September will give updates on activity in the manufacturing and services sectors on Tuesday. Durable goods data for August and the third estimate of second-quarter gross domestic product are due Thursday, alongside weekly jobless claims. These are followed by the University of Michigan's final consumer survey for September.

Housing data include August new home sales on Wednesday and August existing home sales on Thursday.

The U.S. Treasury will auction $69 billion in two-year notes on Tuesday, $70 billion in five-year notes on Wednesday and $44 billion in seven-year notes on Thursday.

Canada

Canadian gross domestic product data for July are due Thursday.

The Bank of Canada resumed interest-rate cuts at its most recent meeting, reducing rates by 25 basis points as it sought to address a weak jobs market. It warned that economic resilience was fading as U.S. tariffs take their toll. However, the central bank was cautious about the prospect of further rate reductions.

Eurozone

Sentiment indicators for September will dominate the data releases, starting with flash estimate eurozone consumer confidence on Monday. Flash estimate French, German and eurozone purchasing managers indices will follow on Tuesday and Germany's Ifo business climate index on Wednesday. Germany's GfK consumer climate survey is due on Thursday, alongside the French consumer confidence survey. Eurozone money supply data is due on Thursday.

"On the whole data for 3Q has pointed to some resilience in the economy," said Investec analyst Ryan Djajasaputra in a note. "We expect this momentum to be reflected in another small improvement in the PMI in September, which at current levels remains relatively low," he said. Clarity over tariffs following last month's trade agreement with the U.S. provides a further positive development, he said.

Belgium will sell 2.2-2.6 billion euros in 2030-, 2035-dated nominal and 2039-dated conventional bonds on Monday. The Netherlands will launch a new January 2056-dated government bond on Tuesday, aiming to raise 4-5 billion euros. Germany will sell 4.5 billion euros in September 2027-dated Schatz on Tuesday and 4 billion euros in November 2032-dated Bund on Wednesday. Italy will conduct auctions on Wednesday and Friday.

U.K.

Flash purchasing managers' surveys for September on the manufacturing and services sector are due on Tuesday.

The Bank of England left interest rates on hold at 4.0% at its September meeting and reduced the pace of quantitative tightening to 70 billion pounds over the next 12 months, from 100 billion pounds in the last year.

The BOE Governor Andrew Bailey will have a fireside chat with Randy Quarles, Cynosure Group, on Monday.

The BOE Chief Economist Huw Pill will have a fireside chat at the Inaugural Pictet Research Institute Symposium on Tuesday.

The BOE members may give us some more insight into their views on the future path of interest rate cuts, following the September interest-rate decision, Investec Economics economists say in a note.

U.K. public sector borrowing data for August jumped to 18 billion pounds from 14.4 billion pounds in August 2024. Rising government debt continues to raise concerns about the sustainability of U.K. public finances, putting upward pressure on gilt yields.

The U.K. plans to sell January 2056 gilts Tuesday and March 2030 gilts Wednesday.

Latin America

Mexico's central bank announces a rate decision on Thursday. Banxico is expected to lower its benchmark interest rate by a further 25 basis points to 7.5%. Headline inflation rose slightly to 3.6% in August but core pressures remained relatively stable at 4.2%. "This should be enough for Banxico to keep easing towards 7.00% by year-end," Barclays analysts say in a note. Barclays expects 25bps rate cuts this month, November and December followed by two more in 2026 to 6.50%.

Scandinavia

Sweden's Riksbank announces a rate decision on Tuesday. The market is pricing a 65% chance that the policy rate will be held at 2.0% and 34% odds of a 25 basis points rate cut, LSEG data show. The Riksbank is likely to leave rates unchanged as recent economic data have been stronger than expected, reducing the need for further rate cuts, Capital Economics economist Adrian Prettejohn said in a note.

"While the risks are towards a further cut later this year, we think the Riksbank is most likely to keep its policy rate at 2% for the foreseeable future as the conditions are already in place for an economic recovery over the coming 12 months," he said.

Sweden and Norway will conduct bond auctions on Wednesday.

Switzerland

The Swiss National Bank announces a policy decision on Thursday. SNB policymakers have recently pushed back against the prospect of negative interest rates so they are likely to leave the policy rate at zero, Capital Economics economist Adrian Prettejohn said in a note. "However, we think inflation will be lower than officials' forecasts in the coming months and policymakers will soon change their tune on negative interest rates," he said. "December looks most likely for the next cut."

Hungary

Hungary's central bank announces a decision on Tuesday. The central bank is likely to leave interest rates unchanged at 6.5% despite the continuous strengthening of the Hungarian forint, ING analysts said in a note. "Looking further ahead, we still do not anticipate any interest rate cuts this year, given that the Monetary Council is still focused on addressing persistently high inflation expectations."

Czech Republic

The Czech central bank announces a policy decision on Wednesday. The Czech National Bank is likely to keep its policy rate unchanged at 3.5%, ING economist David Havrlant said in a note. Core inflation remains elevated and "inflationary risks loom on the horizon." At the same time, the economy is gradually entering a fully-fledged rebound, supported by vibrant household spending, booming construction, and signs of stabilization in industry, he said.

Japan

Government data due Friday is expected to show that consumer inflation excluding fresh food prices in the Tokyo metropolitan area rose 2.8% in September from a year earlier, according to a poll of economists by data provider Quick. That would follow a 2.5% increase in August and may bolster expectations that underlying price pressures remain sticky.

The Bank of Japan is scheduled to conduct outright purchases of Japanese Government Bonds on Wednesday, covering four maturities from one to 25 years. The move should help stabilize yields on the day, with investors watching closely for signs of strain at the longer end of the curve.

Separately, the Ministry of Finance will auction about 400 billion yen of 40-year JGBs on Thursday, reopening a May 2025 issue. The ultra-long-dated securities are likely to draw keen demand from life insurers and pension funds, given their attractive yields and limited supply.

Japanese financial markets will be closed Tuesday for a national holiday.

Australia/New Zealand

Australian bond markets will take their cue from August inflation data due Wednesday. July's outcome surprised to the upside at 2.8% on year, fueled by electricity, new dwellings and holiday travel. Electricity prices surged 13% in July due to timing of rebates and annual price reviews.

Westpac forecasts a 3.1% on-year rise in the monthly CPI indicator for August, highlighting risks from a recovery in homebuilding costs, the bank said in a note to clients.

While the Reserve Bank of Australia is unlikely to be alarmed about the drift higher in the inflation pressures, the data is likely to signal the central bank's easing cycle may not be as deep as expected. The RBA has already cut interest rates three times since February and indicated that more likely inflation remains contained.

RBA Governor Michele Bullock testifies before the House of Representatives Standing Committee on Economics in Canberra on Monday. Her remarks come a week before the central bank's next policy meeting and could shape expectations on whether another cut is likely this year.

China

The People's Bank of China will announce loan prime rates on Monday, with markets watching to see when the rates--the benchmarks for household and corporate lending--will be lowered to stimulate credit demand.

Economists at Citi expect the one-year LPR to stay at 3.0% and the five-year at 3.5%, though they think the central bank will favor keeping the options of lowering the reserve requirement ratio for lenders and the 7-day reverse repo--its main policy rate--on the table.

DBS economists anticipate another 10-basis-point reduction in the one-year LPR by the end of the year. Amid U.S. tariffs, a continuing property downturn and weak consumption, the central bank is "likely to maintain an accommodative stance to reduce borrowing costs and support reinvestment," they said.

Malaysia

Malaysia's Statistics Department will release August inflation figures on Tuesday.

ANZ economist Bansi Madhavani expects a modest acceleration to 1.3% on year from 1.2% in July, driven by higher transport prices. Inflation is expected to remain benign in the near term, supported by moderate domestic demand and soft global commodity prices, she said.

The planned petrol subsidy reforms taking effect at the end of September are also expected to reduce fuel costs for local consumers. Despite subdued inflation, ANZ doesn't expect Bank Negara Malaysia to cut rates further anytime soon, unless growth significantly weakens.

Singapore

Singapore will publish its August inflation report on Tuesday. The city-state's imported inflation is expected to remain moderate in the near term, the Monetary Authority of Singapore and the Ministry of Trade and Industry said last month.

Core inflation cooled to 0.5% on year in July from 0.6% in June.

Economists at DBS expect the core inflation reading--which excludes private road transport and accommodation--to have stayed manageable at 0.5% on year. Although accommodation inflation likely remained low, a pickup in private transport likely led to a slight increase in headline inflation to 0.7%, DBS said.

Any references to days are in local times.

Write to Emese Bartha at emese.bartha@wsj.com and Jihye Lee at jihye.lee@wsj.com