Despite today’s NFP print potentially having a massive impact on a possible Fed hike in a few weeks, it will collectively be the “big four” central banks (Fed, ECB, BoJ and BoE), a G20 meet up, and an OPEC get together over the coming days that’s expected to be driving capital markets this month.
Here are the most important dates to be aware of:
September 8: ECB Governing Council meets.
President Draghi and his fellow policy makers face a “make-or-break” bid to save its QE strategy in the face of self-imposed limits on what it can purchase.
The word on the street is that the ECB might extend the timing of its asset purchase program from March to September 2017. The ECB, like the BoJ, would prefer the Fed to be doing most of the heavy lifting.
September 15: Bank of England meets.
Post-Brexit data does not warrant any further action by Governor Carney just yet. With that, futures dealers are only pricing in a +8% probability of a rate cut this time around.
At this meet, expect the markets attention to focus on the implementation challenges of the BoE’s monetary authority’s bond-purchase scheme after a challenging start to the program – remember, the BoE could not find enough ‘product’ to purchase (no one wanted to sell) on the first go-around.
September 20/21: Bank of Japan (BoJ) two-day meet.
This could be the outlier policy meeting of the month.
The markets fear is that Governor Kuroda is quickly running out of options to tackle Japans weak GDP and stubborn deflationary pressures. Also, with a declining stock of government bonds available for purchase, QE is becoming more difficult to implement.
Recent rhetoric has the market leaning towards a BoJ decision that will cut rates further into negative territory. Both the BoJ and the Japanese government need to be more innovative than that, now that a stronger JPY continues to work against their efforts.
September 20/21: Federal Open Market Committee (FOMC) two-day meet
A widely held thought on the street is that the Fed will raise rates just once this year and that they will wait until after the U.S election to do so. Dealers currently see a +27% chance that the Fed will raise rates this month and a +57% chance of an increase by December.
However, expect this morning’s employment report to change opinions very quickly if it is much stronger or weaker than expected.
September 4/5: G20 Summit meet
It’s this weekend and China is the host. The topic is “global growth and financial-sector issues.”
G20 countries know that “fiscal policy” needs to catch up as “monetary policy” on its own is just not working.
The street does not anticipate a coordinated plan for a large fiscal stimulus strategy to be voiced at this meeting, however, do not be surprised that policy makers talk up the growth-boosting effectiveness of fiscal policy.
September 26/28: OPEC meeting in Algeria
Is this the organization that cried wolf? Maybe not, but they and non-member states have certainly being keeping crude traders/dealers on their toes this summer with the possibility of a production freeze announcement this month. Sounds like deja vu?
Until the markets get a clear and definitive answer, trading crude will remain the “hot” commodity that it has been this summer.