FX Week Ahead: Inflation Data Due From Eurozone, UK, Japan And Canada

Talking Points:

09/17 Monday | 09:00 GMT | EUR Eurozone Consumer Price Index (AUG F)

The final August Eurozone Core CPI is due in at +2.0% (y/y), a slight drop from the initial reading reported in at +2.1%. The final core reading for August is set to be confirmed at +1.0% (y/y), down from +1.1% in July. The Euro, on a trade-weighted basis, is down over the past year, so it stands to reason that inflation has a natural cushion underneath it for the foreseeable future. As was confirmed at the September ECB rate decision, policyremains on a preset course – ending QE in December 2018 and raising rates in “summer 2019” – as the Governing Council has greater confidence in the path that inflation will take moving forward. Accordingly, there is only limited scope for a significant move in the Euro around the release.

Pairs to Watch: EUR/GBP, EUR/JPY, EUR/USD

09/19 Wednesday | –:– GMT | JPY Bank of Japan Rate Decision

Bank of Japan policymakers are highly unlikely to change policy when they meeting in the coming week, for several reasons. On the data front, inflation remains well-below its price stability target of +2% over the medium-term, a fact that will be confirmed later in the week when the August CPI report is due. On the policy front, not enough time has passed since the July meeting, where tweaks were made to allow the BOJ to keep rates lower for longer via new yield control measures. Another change in such close proximity to the last one would only serve to erode confidence in the BOJ. Finally, the external trade environment continues to weaken, now that US President Trump has set the US trade deficit with Japan in his sights.