Week Ahead – No ease up for Powell

Powell given a second chance

It’s a fascinating time to be following financial markets. There are so many massive things happening at the same time that it can be difficult to judge what exactly is driving the markets at any one moment. This week, it’s the central banks that have dominated and with Powell making numerous appearances next week, days after disappointing the markets by only be extremely dovish, that’s unlikely to change.

Powell back under the microscope

Covid wreaking havoc on Indian economy

Saudi Energy Minister delivers warning to oil short sellers

Key Economic Events

Sunday, Sept. 20

– Secretary of State Pompeo has noted said the US is preparing to reimpose practically all sanctions on Iran.

– The UK’s opposition Labour Party holds its annual conference online. Leader Keir Starmer speaks on Tuesday.

– Italy holds regional elections.

Monday, Sept. 21

– European Union trade ministers meet in Berlin.

– Prime Minister Boris Johnson’s Internal Market Bill may get scrutinized in the House of Lords, despite Johnson agreeing on a compromise with members of his Conservative Party. Attention will also be on the EU, which has threatened the collapse of trade talks unless Johnson withdraws the legislation.

– The Federal Reserve Board holds an open meeting to discuss advance rulemaking on the Community Reinvestment Act.

Economic Events:

  • South Korea trade
  • China loan prime rate decision
  • New Zealand credit card spending
  • Macau visitor arrivals

Tuesday, Sept. 22

– Chicago Fed President Charles Evans takes part in a webinar discussion on the U.S. economy and monetary policy hosted by OMFIF, the Official Monetary and Financial Institutions Forum.

Economic Events:

  • U.S. existing home sales
  • Australia ANZ Roy Morgan consumer confidence, weekly payroll and wages
  • South Africa leading indicator
  • Sweden rate decision: Expected to keep Repo Rate unchanged at 0.00%
  • Hungary rate decision: Expected to keep Base Rate unchanged at 0.60%

Wednesday, Sept. 23

– Fed Chairman Jerome Powell is expected to testify to the House’s select subcommittee to the coronavirus crisis about the central bank’s response.

– The Chicago Payments Symposium has remarks by Cleveland Fed President Loretta Mester on “payments and the pandemic.” Chicago Fed President Charles Evans takes part in a MNI-moderated discussion on the U.S. economy.

– Boston Fed President Eric Rosengren discusses the U.S. economy at a virtual event hosted by the Boston Economic Club. San Francisco Fed President Mary Daly takes part in a virtual discussion on the impact of the pandemic on the labor force.

– The Trudeau government unveils a new agenda for a spending plan to help drive the economic recovery, in a speech delivered by Governor General Julie Payette at the opening of Canada’s parliament.

– Weekly EIA Crude Oil Inventory Report

Economic Events:

  • U.S. Markit PMIs, FHFA house price index
  • Mexico retail sales
  • Australia CBA PMI, ABS preliminary retail sales
  • Japan Jibun Bank PMI, convenience store sales, all industry activity index
  • New Zealand rate decision: Expected to keep cash rate unchanged at 0.25%
  • Czech rate decision
  • Singapore CPI

Thursday, Sept. 24

– EU summit. Leaders from across the bloc meet in person to discuss industrial strategy in the aftermath of Covid, tensions with Turkey and Russia, relations with China, and the state of the Brexit negotiations. Through Sept. 25.

– Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin testify to the Senate Banking Committee about coronavirus relief.

– St. Louis Fed President James Bullard discusses the economy and monetary policy on a Global Interdependence Center webinar. The Chicago Fed’s Charles Evans discusses the outlook for the U.S. economy in a virtual event hosted by the Illinois Chamber of Commerce

– Hungary’s Central Bank Governor Matolcsy, Finance Minister  Varga and Mol Chairman-CEO Hernadi headline a two-day annual economics conference.

Economic Events:

  • U.S. initial jobless claims, new home sales
  • New Zealand trade
  • Norway rate decision: Expected to keep Deposit Rate unchanged at 0.00%
  • Japan department store sales
  • Hong Kong trade
  • Turkey rate decision: Expected to keep One-Week Repo Rate unchanged at 8.25%

Friday, Sept. 25

Economic Events:

  • U.S. durable goods, Baker Hughes rig count
  • Mexico economic activity
  • South Korea consumer confidence
  • Japan PPI services, supermarket sales
  • Australia ABS preliminary merchandise trade
  • Singapore industrial production
  • China BoP

Sovereign Rating Updates: 

– Poland (Fitch)

– United Kingdom (Fitch)

– Saudi Arabia (S&P)

– Hungary (Moody’s) 

– Sweden (Moody’s) 

– European Union (DBRS)



Fed Chair Powell will deliver two days of testimony in Washington DC. On Wednesday, he will testify to the House’s select subcommittee and on Thursday with the Senate Banking Committee.  Powell will be asked several questions about the Fed’s new monetary strategy and if they are almost out of ammo.  After Jackson Hole and the September FOMC decision, Powell will likely confirm their outcome-based guidance means rates will be lower for longer and highlight the risks to the outlook.  Rates are going nowhere for a few years and all the Fed speak this week should lean towards further dovishness.  

The US still does not have the virus under control as over 20 states are recording more infections when compared to the prior week.  It will be difficult for governments to continue to ease COVID-19 lockdowns if the downward trend in US cases is interrupted. The upcoming round of economic data, the flash Markit PMIs and durable goods data should show economic growth rebound is slowing. 

US Politics

The election is nearing and President Trump may have got his groove back.  Joe Biden maintains leads across the national polls but Trump is starting to chip away at his lead.  Biden’s lead has fallen to 5.8-points in the RealClearPolitics poll and 6.7-points with FiveThirtyEight’s poll.  Trump is benefiting from vaccine optimism and as labor market recovery heads in the right direction, unadjusted claims continue to decline, albeit still quadruple the number before the pandemic.  


Policy makers from the ECB were out in force last weekend, clarifying comments from the meeting last Thursday regarding the currency exchange rate. Lagarde’s comments in the press conference gave the impression that the central bank was very relaxed about the currency’s rapid appreciation but policy makers, including Lagarde, were keen to stress otherwise. The free run at 1.20 against the dollar may not be so welcome afterall. 

Especially not with Covid cases rising rapidly across Europe which threatens the recovery that had already started stalling. The ECBs optimistic assessment may be pared back between now and the end of the year. PMIs next week could provide more insight into how the situation is impacting business confidence.


Not the best week for the UK as far as Brexit is concerned. Talks with the EU are not progressing, with the Internal Market Bill only serving to further frustrate Brussels. It’s not just Brussels that’s taken issue with it, though. Democratic Presidential hopeful Joe Biden weighed in this week, warning that the Good Friday Agreement should not become a casualty of Brexit, effectively echoing Nancy Pelosi’s words last week and insisting it would not pass Congress. This is seemingly one thing both Presidential candidates are in agreement on. Boris Johnson may be able to sell no-deal to some Brexiteers, but no trade deal with the US as well? That will be a whole lot harder. Something has to give.


Coronavirus cases are spiking in the UK and more restrictions are being imposed across the country as businesses once again are forced to contend with the disruption. What’s more, the government is reportedly considering a two week lockdown coinciding with the half term school holiday’s next month which will be another hammer blow to business. On the bright side, more people are taking the government’s advice and returning to work, with the ONS claiming 62% of people went into the office last week. 

The Bank of England once again discussed negative interest rates at the meeting this week, triggering another decline in the pound which has spent much of the week recovering the sharp declines suffered in September. With the risk of no deal heightened and deadline less than a month away, the pound will remain volatile and could come under pressure. I still believe a deal will be struck which should be positive for sterling. When that comes and whether the two sides can actually work to a deadline is another thing altogether.

South Africa

The rand could see further momentum from the potential ending of the SARB’s easing cycle.  The September decision to hold rates despite downward pressure on growth and inflation for the rest of the year likely means they are done and that next move will be a hike.  


TikTok saga drags on. Very light data with creating a headline driven market with geopolitics to dominate.

China Loan Prime Rate decisions on Monday. Expected unchanged.

China activity will drop as the week progresses ahead of Mid-Autumn holiday the following week.

Hong Kong

Covid-19 measures continue to dampen economic activity. No notable data or event risk next week.


Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. India has become the no 2 infected country and hit 5 million cases this week with no end in sight.

GDP shrank 23.90% in Q2 and is expected to shrink by 10+% for the year, increasing stress on the banking sector. INR appreciation has resumed, supported by e-commerce investment inflows, lower oil prices and high interest rates, with RBI unable to cut in this environment.

No significant data this week.

New Zealand 

The New Zealand covid-19 outbreak is bartering. NZD/USD rising as a pro-cyclical recovery play.

RBNZ decision Wednesday will remain unchanged. Markets watching for comments on potential negative interest rates. Could spark a NZD/USD sell-off.


Trade relations with China continue to be a flashpoint. Relatively quiet this week though.

ACT eased interstate movement restrictions. Victoria State’s may ease restrictions next week, equity and AUD supportive.

PMI Wednesday only data of note. AUD/USD supported as pro-cyc;lical recovery play with copper and iron ore prices remaining at one-year highs.


Suga was appointed as the new Prime Minister as expected. Passed without incident. 

Bank of Japan rate decision was unchanged and dovish as expected. PMI Wednesday the only significant data. Japan is on holiday Monday and Tuesday, dampening activity next week.

USD/JPY has fallen through monthly support after the FOMC telegraphed lower for longer rates. Yen could strongly appreciate with Japan away early next week.



Saudi Arabia’a Energy Minister,  Prince Abdulaziz bin Salman, had some harsh words for anyone wanting to profit from a decline in oil prices after the OPEC+ JMMC meeting this week, warning that the market won’t go unattended and he wants traders to be as jumpy as possible.

With a threat that anyone who gambles on the market will be “ouching like hell”, it will be interesting to see just how oil prices now respond as they near the $40 mark.

The threats weren’t just saved for those that bet on weaker prices, with a thinly veiled warning directed at those not complying within the group. He warned that attempts to over-produce and hide non-compliance have and will always end in failure, a warning clearly aimed at the UAE which has fallen far short of its quota and will make up the short-fall with compensation cuts by year-end. 

With Hurricane Sally forcing shut-ins in the Gulf, oil prices have been well supported in recent days and these comments could well put a floor underneath them for the foreseeable.

Even in the event of a Covid-driven demand shortfall, an emergency October meeting will be called to address the change, with the next scheduled meeting taking place in December.


Gold is on course to end the week roughly where it started, despite the Fed not delivering the uber-dovish message the market wanted to hear. The short-squeeze in the dollar was brief but that doesn’t mean it’s all downhill from here.

The dollar has fallen considerably since March which has provided significant support for gold but it’s since entered a period of consolidation. The dollar has threatened a correction but has failed to gather much momentum so far.

The failure of gold to break $2,000 once again doesn’t bode well for the yellow metal. Ultimately though, the range is tightening. The good news is that we may not have to wait too long for a breakout.


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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.