📌 Focus on Tomorrow’s U.S. FOMC; Today’s Watch Is U.S. Retail Sales
🏦 Central Bank Week Overview
This week brings a cluster of key policy announcements: FOMC and Bank of Canada (rate cuts expected, –25bp baseline), BOE and BOJ (widely seen on hold).
Last week’s ECB hold decision reinforced policy divergence, which tends to fuel dollar selling pressure.
However, U.S. equities remain firm, and capital inflows may still support the dollar.
💱 FX & Political Focus
The yen outlook hinges on the BOJ meeting and the LDP leadership race:
If Takaichi leads: fiscal expansion expectations → yen weakness.
If Koizumi or others gain ground: political uncertainty → yen strength.
Still, “political market” reactions tend to be short-lived.
🇺🇸 FOMC Expectations
A 25bp rate cut is fully priced in.
Some speculation of a 50bp cut, though seen as politically driven; if delivered, it could spark a sharp USD sell-off on fears of weakened Fed independence.
Consensus remains for a measured –25bp cut.
📊 Today’s Data Highlights
🇩🇪 Germany ZEW Economic Sentiment (Sept)
🇪🇺 Eurozone Industrial Production (July)
🇨🇦 Canada Housing Starts (Aug), CPI (Aug)
🇺🇸 U.S. Retail Sales (Aug) → key gauge of consumption
🇺🇸 U.S. Import/Export Prices (Aug), Industrial Production (Aug), Business Inventories (July), NAHB Housing Market Index (Sept)
👉 Retail sales are closely watched, but with the FOMC looming, market moves are likely short-lived.
⚠️ Geopolitical Risks & Gold Surge
Russia and Belarus launched joint military drills Zapad 2025, widely perceived as offensive exercises aimed at Europe.
Multiple drone incursions reported over Polish and Romanian airspace, heightening NATO–Russia tensions.
Safe-haven demand, coupled with a softer dollar, is pushing gold toward $3,700, testing historic highs.
🗣 Other Events
Lithuania’s Simkus and Spain’s Escrivá to present economic outlooks.
U.S. 20-year bond auction ($13bn).
📉 Dollar Index Update
Continues to weaken.
Topped at 97.388 in Tokyo afternoon before sliding toward 97.009, nearing a major break below 97.
This marks the weakest level since July 7.
✅ Summary:
Markets are calm ahead of tomorrow’s FOMC, with U.S. retail sales in focus today. Dollar sentiment remains fragile as the DXY flirts with a July low, while gold rallies on a potent mix of dollar weakness + geopolitical tension.
