Traders go into this week with the $700 billion credit market bailout casting a shadow over the economic data schedule. However, this should be resolved early in the week as the US Treasury tries to push the deal through.

Interestingly, a look at interest rate futures tells us that there is currently an 80% chance that the Fed will cut rates by 0.25% in their October meeting. The dust from the credit bailout will hardly have time to settle before traders start looking at this week’s massively important data. But will the economic indicators support the need for a cut or serve to reduce it?

This Week
The first high volatility event of the week will come from New Zealand on Sunday evening at 22:45. The New Zealand Trade Balance is expected to expand its deficit from 781 million Dollars to 912 million.

Monday will be reasonably quiet on the data front with the Core PCE Price Index from the US worth a watch. However, this is classed as a medium volatility event. The only high volatility news scheduled for Monday will come from New Zealand once again. Building Consents are due at 22:45 and are coming off the back of a 4.7% MoM increase for the month of July.

Tuesday will be very busy beginning with Building Approvals and Retail Sales Trend at 02:30 from Australia. Building Approvals are expected to fall by 1.0% MoM following a 2.3% decline in June. The Retail Sales Trend number is set to post a 0.1% increase, inline with the previous month’s number.

At 03:00 New Zealand will follow with its third high volatility event of the week. The National Bank of New Zealand Business Confidence indicator is due. Last month’s reading was -20.5 and traders will be keen to see if a recovery has taken place.

Next up at 09:30 is UK Current Account. The data is expected to come in at -9.7billion GBP compared to -8.4billion previous.

Later in the day the economic focus will shift to the opposite side of the Atlantic with Canada and the US reporting. Canada will release their monthly Gross Domestic Product. Last month’s data posted a modest gain of 0.1% with 0.2% expected this time.

The first high volatility event of the week from the US will be the Conference Board’s Consumer Confidence. The index is expected to worsen slightly from 56.9 to 54.6.

Wednesday will be slightly quieter with 4 high volatility events scheduled compared to Tuesday’s 5. The US economic machine will really kick in but Japan’s Tankan Large Manufacturers Index is due first at 00:50. The index came in at 5 last time but it is expected to turn negative at -2 this time.

The UK’s Manufacturing PMI is due to be released at 09:30. Once again the index is likely to show industry contraction with a reading of 45.0 expected.

At 13:15 the first of the week’s important US employment data is set to be released. ADP Non-Farm Employment Change is expected to show 55K fewer jobs in September. This data will be very closely watched as it leads the official government figure by two days.

Later on at 15:00 the ISM Manufacturing PMI will be released. Last month the index was 0.1 below the expansion/ contraction threshold of 50.0 and it is expected that this number will deteriorate to 49.5 for September.

On Thursday at 02:30 the Australian Trade Balance is due. Last month it came in at -0.72B billion AUD. This deficit is expected to be reversed to a slight surplus of 0.26 billion.

This will be followed by the UK’s Nationwide House Price Index at 07:00. The data is expected to show a 1.6% decline for the month of September after a 1.9% fall in August.

One of the main events of the week will be the ECB Interest Rate Announcement and the accompanying ECB Press Conference. The rate announcement is considered a medium volatility event with no change expected. However there is more of a risk to the downside and a rate cut may not be completely unexpected. The Eurozone Minimum Bid Rate currently stands at 4.25%.

The ECB Press Conference is regarded as a high volatility event as traders watch closely for Trichet’s explanation of the rate decision. The language used in the press conference is scrutinized very closely for clues to future rate moves.

Ahead of the Non-Farm Employment Change data due on Friday, Initial Jobless Claims will be closely watched. Last week’s new claims exploded to 493K with the number expected to fall slightly to 475K this week.

Friday will be dominated by news from the US but prior to this UK Services PMI is expected to create high volatility. The service sector is expected to show contraction in the month of September with a reading of 48.0 expected when compared to August’s 49.2.

At 13:30 US employment data will take centre stage. Non-Farm Employment Change is likely to show 100k fewer jobs compared to -84k in August. After increasing from 5.5% 3 months ago, US Unemployment Rate is likely to remain firm at 6.1%.

At 15:00 the final high volatility event of the week is due. This time it showcases the US non-manufacturing sector. ISM Non-Manufacturing PMI is expected to fall to the expansion/ contraction zone for the month of September, deteriorating from 50.6 the month before.

For full updates please see this week's economic calendar.

The sale of new homes in the US hit a 17-year low in August despite the lowest prices in 4 years, the US Census Bureau announced today.

Seasonally adjusted, New Home Sales fell by 11.5% to an annualized rate of 460K in August. This is the lowest figure seen since January 1991. It had been expected that sales would fall but by a much more modest pace; economists had expected a number in the region of 510K.

Worryingly, the fall in sales was actually accompanied by a fall in the median price of a new home. Prices fell by 6.2% from a year ago to $221, 900, which is the lowest level seen since September 2004.

The average price of new homes was also down. It now stands at $263, 900, down by 12.4% over the year, 11.8% on the month.

Inventories in the month of August were down to 408K, the lowest level since August 2004. This number reflects a 10.9-month supply at the current sales rate. Fewer homes for sale may seem like a positive factor until you combine this with a decreasing number of sales. The lack of demand in the market place is leading to a reduction of new homes under construction with only 11K in August, the lowest since December last year.

Regionally the West has been the worst performer. Sales have decreased by a massive 36.1% on the month to 78K. This is the lowest figure since April 1982. On the year sales in the West have fallen by a massive 50%, a decline not seen since September 1981.

The National Association of Realtors (NAR) reported today that US Existing Home Sales fell by more than expected to 4.91M in August. Prices of existing homes also fell, dropping by a record amount.

It had been expected that the seasonally adjusted, annualized rate of existing home sales would fall to 4.93M in August, down from a revised 5.02M in July. Today’s data represents a 2.2% fall from last year’s sale pace. Sales are now down by 10.7% year to date.

The median price of an existing home came in at $203 100, down 9.5% from last year. This is the largest drop since NAR records began in 1999. Prices in the West make the toughest reading as they now stand at -23.9% YoY.

Inventories of homes for sale improved slightly from July’s record breaking 4 575 000 by 7.0% to 4 255 000. However, this figure still represents 10.4 months’ supply at the current sales pace.

Price action in the US Dollar is currently range-bound. As you can see from the GBPUSD below, price has remained constrained since the beginning of testimony from Capitol Hill on Tuesday. The range is likely to remain intact until traders can digest the remarks and implications concerning the proposed credit market bailout.

Trading in the GBPUSD is currently bound between the extremes of 1.8640 and 1.8469.

Canadian Core CPI beat expectations for the month of August, Statistics Canada announced today.

Seasonally adjusted, the Core index increased 0.3% MoM in August, beating expectations of a 0.1% increase. This is also up from the 0.1% seen in July.

Today’s number hauls the yearly Core CPI up to 1.7%, better than the 1.6% expected and the 1.5% seen over the last four 12 month periods.

The headline Consumer Price Index, or raw number, came in slightly worse than expected on a MoM basis. A figure of -0.2% was reported in comparison to -0.1% expected. Overall, this brings the YoY number to 3.5%, up from 3.4% in July.

The Bank of Canada’s Core CPI excludes fruit, fruit preparations and nuts, vegetables and vegetable preparations, mortgage interest costs, natural gas, fuel oil and other fuels, gasoline, inner-city transportation and tobacco products and smokers’ supplies. This would account for the difference between headline and Core CPI.

Among the components weighing on the all-items CPI were transportation down 2.1% MoM and energy which registered -3.0% MoM. However, on a yearly basis transportation and energy are still up 5.8% and 20.2% respectively.

The Canadian Dollar’s reaction to the data was fairly tame, managing an intra-day low of 1.0303 in the USDCAD. However, traders are still very much preoccupied by the US Fed Wall Street bailout.

Last Week
Traders will go into work on Monday morning still trying to digest last week’s events. Just how will the market react to one of the most volatile weeks seen in decades?

Markets were thrown into turmoil straight from the off with the announcement that Lehman Brothers had gone bankrupt and the acquisition of Merrill Lynch by Bank of America. This was followed by the Fed bailout of AIG.

Financial markets in the US responded accordingly with the DOW’s biggest fall since 2001 with strength was seen in Gold and the Japanese Yen on risk aversion.

However, coordinated action from the world’s central banks flooded the market with liquidity which sparked the sharpest rally in US stocks since 1987. The US Government alone announced a $700 billion bank rescue plan and announced a ban on shorting financial stocks. This move was mirrored by financial authorities in the UK, Ireland and Australia.

This Week
This week will undoubtedly be dominated by the talking heads with Bernanke, Paulson and SEC Chairman Cox testifying no less than 4 times at various times. There are also two important US Housing data releases to consider.

Monday will start fairly slowly with little volatility coming from UK, Japanese or Eurozone economic releases. The first high volatility event of the week will come at 13:30 in the shape of Canadian Core Retail Sales. There was a 1.4% MoM increase for July with the August figure expected to show 0.3% growth.

Canada will also give us our second high volatility event of the week. The Core CPI is due for release at 12:00 on Tuesday. Data for August is expected to replicate that of July with a modest 0.1% MoM increase.

At 15:00 we have the first of the big testimonies with Bernanke, Paulson and Cox talking about the government takeover of Fannie Mae and Freddie Mac and recent market turmoil. They will testify in front of the Senate Banking, Housing and Urban Affairs Committee in Washington DC.

Wednesday gets underway with some economic volatility from the Eurozone with German Ifo Business Climate due for release. The index is likely to contract slightly to 94.2 from 94.8 last month.

Two hours later at 11:00 the UK’s Confederation of British Industry (CBI) index of Realised Sales will be released. This is a high volatility event with last month’s reading of -46 expected to improve slightly to -40. However, this number is still well below registering an increase in sales volume amongst the surveyed retailers and wholesalers.

At 15:00 we have a double header from the US. The first big housing data release of the week is due with Existing Home Sales likely to contract to 4.93M in August from 5.00M in July. At the same time Bernanke’s testimony before the Congressional Joint Economic Committee in Washington DC gets underway.

Bernanke is not finished there however. His second testimony of the day, this time with Paulson, before of the House Financial Services Committee gets underway at 19:30 BST.

Thursday will be dominated by high volatility from US sources. First of all we will see Core Durable Goods Orders. Last month offered a positive 0.7% increase with economists expecting that to be offset by -0.5% this time around.

At 15:00 we will see New Home Sales. Traders are expecting August’s sales to have softened to 510K from 515K in July.

Bernanke’s fourth and final outing of the week will come along with US Treasury Secretary Paulson once again. This time they will appear before the House of Representatives Committee on Financial Services with regards to Fannie Mae, Freddie Mac and recent market turmoil.

Thursday is rounded off by New Zealand’s Gross Domestic Product (GDP). QoQ the indicator is likely to show that the New Zealand economy contracted by 0.5%, more than the -0.3% seen in the previous quarter.

Friday promises to be a slightly quieter day, dominated by medium volatility events. The UK’s Nationwide House Price Index (HPI) is tentatively scheduled for a release although this could be put back to feature in the last week of the month. Economists expect a fall of 2.0% MoM to be reported.

A full schedule of this week’s testimonies can be found on our economic speeches calendar. The Existing Home Sales, New Home Sales and Canadian Core CPI releases will also be supported by our visual analysis and historical data tool. Full breakdown and evaluation of these data releases will be featured right here on our Market News blog.

The Bank of England’s (BOE) Monetary Policy Committee voted 8-1 to keep interest rates on hold at 5.00% in September, the meeting minutes published today show.

Once again David Blanchflower voted for a cut, this time of 0.50%, but Tim Besley did not vote for a hike. The market had expected him to do so in an 8-1-1 vote split but it was not to be. So, today’s split is slightly dovish in terms of rate outlook from the Bank.

On closer examination, today’s minutes show that the MPC considered the possibility of both raising and cutting rates before deciding to remain unchanged. This open discussion highlights the difficult position members find themselves in. On the one hand there is record consumer inflation and on the other a slowing economy and increasing unemployment.

It will be very interesting to see how events since the September meeting are received by the Committee. Today we heard from National Statistics that Claimant Count Change increased by 32, 500 in August, the biggest jump since 1992. And it remains to be seen how the knock on effects of the fall of Lehman Brothers will impact the UK economy.

Related links: BOE MPC Meeting Minutes - Visual Analysis for the BOE MPC Meeting Minutes

Core CPI increased 0.2% MoM seasonally adjusted, the Bureau of Labor Statistics reported today. This brings the un-adjusted 12-month number to 2.5%.

Core CPI is regarded by the Fed as the key indicator when setting the Federal Funds Rate, which is also set to be reported today. The 3-month annualized average has Core inflation at 3.4% which is above the Fed’s comfort zone. Although the recent crisis in the credit markets will probably prevent the Fed from increasing rates.

The headline CPI provided a slight shock today when it came in at -0.1% MoM. This represents the first decline in consumer inflation since October 2006 and brings the un-adjusted annual rate to 5.4%, below expectations of 5.5%.

This drop was due in part to the 3.1% fall in energy prices in August. However, energy is still up 27.2% over the last year. Transportation costs also weighed on the Index, down 1.5% MoM.

The increase in food costs continues; up 0.6% in August, 6.1% over the last 12 months.

Market reaction in the US Dollar is hard to judge due to other high volatility data, credit concerns and the forthcoming FOMC Interest Rate Statement. However, the US Dollar is trading slightly higher against the Euro and UK Pound on an intra-day basis.

Last Week
The most interesting price action last week came on Friday with the US Dollar giving back some of its recent gains. The Dollar sell-off was triggered by weaker than expected PPI and Retail Sales news and speculation that the Fed may have to cut interest rates further in order to stimulate the economy.

However, it is unlikely that the Greenback has formed anything more than a short-term top on healthy profit taking activity. The Fed may very well have to cut interest rates further; interest rate futures are currently pricing in a 40% chance of a cut by December, up from 0% a month ago. But the medium term outlook remains the same.

There is still no change in the view that other country’s economies (Eurozone and UK in particular) are slowing faster than in the US. This will lead to interest rate cuts from the respective central banks. Due to the fact that their rates are currently much higher than the Fed’s the Dollar will be supported by the theory that ECB and BOE interest rate cuts will be much more aggressive than any more from the Fed.

This Week
We begin the week on Monday with traders keen to see how Friday’s profit taking has been digested over the weekend. With no high volatility events planned it could be a quiet session, especially with the Japanese national holiday ‘Respect for the Aged Day’.

Monday’s highlights are likely to be the Swiss double header at 08:15 with PPI MoM and Retail Sales YoY due for release. The Producer Price Index is likely to come in at -0.2% after last month’s 0.5% increase. Retail Sales are expected to show a sharp increase with expectations at 2.3% compared to the yearly figure released last month of 0.7%.

Later in the day we are also likely to see some volatility from the US with the Empire State Manufacturing Survey, Capacity Utilization Rate and Industrial Production set for release. All three indicators are likely to show evidence of a waning US economy. The Manufacturing Survey will probably come in at 1.5 vs 2.8 last month, Capacity Utilization will fall to 79.6% from 79.9% and Industrial Production probably contracted by 0.3% last month.

In the early hours of Tuesday morning we will have our first high volatility event of the week. The RBA Monetary Policy Meeting Minutes will be released with traders keen to see how September 2nd’s meeting unfolded. The decision was taken at the time to leave the cash rate unchanged at 7.00%.

Tuesday will play host to four very big announcements with no less than 3 CPI numbers and the FOMC Interest Rate Statement all due. First up is UK CPI with consumer inflation expected to smash the BOE’s 2.0% target once again. Economists are predicting year-over-year inflation at 4.6%, up from the 4.4% in July.

Half an hour later, at 10:00 UK time, the Eurozone CPI will be released. The Consumer Price Index is expected to remain at 3.8% YoY. It should also be noted that the Eurozone ZEW Economic Sentiment is due for release at the same time. It is unlikely that this data will conflict significantly with the CPI but traders should be alert non the less. ZEW Sentiment is expected at -55.0 vs -55.7 last month.

The next high volatility event will be the US Core CPI MoM. The data came in at 0.3% last month with 0.2% expected this time.

Half an hour later at 14:00 we can expect the Treasury International Capital (TIC) Net Long-Term Transactions. The data, which measures the inflow of capital from abroad, is expected to show a surplus of $55.0B compared to $53.4B last month.

At 19:15 the FOMC Interest Rate Statement is due. The Federal Funds Rate is expected to remain at 2.00% with traders watching the language in the accompanying statement very closely. The focus will be on any change in the language that may allude to a rate cut before the end of the year.

Wednesday will see the release of the BOJ Interest Rate Announcement. Although it is not considered a high volatility event in itself with the Overnight Call Rate expected to remain at 0.50%, the BOJ Press Conference due before 08:00 will draw high volatility.

The next round of high volatility on Wednesday is due from the UK. The BOE MPC Meeting Minutes and Claimant Count Change will hit the wire at 09:30. Claimant Count Change is expected to increase slightly with 22.2K expected vs 20.1K reported previously. The MPC Meeting Minutes are likely to show a 1-1-7 vote split in favour of keeping rates unchanged at 5.00%.

Next up for the US is the release of Building Permits. Economists are expecting a figure of 925K residential permits issued compared to 937K last month.

On Thursday the first high volatility event will come from the UK at 09:30. Retail Sales MoM are due with a figure of -0.4% expected compared to a 0.8% increase last month. UK Retail Sales have been exceptionally volatile of late with numbers ranging from 3.6% to -4.3% over the previous 3 months. It would be very wise for traders to exercise caution around the time of this event; especially those focussed on short-term price swings.

At 13:00 the third central bank announcement is due. This time it comes in the shape of the SNB Interest Rate Statement. The Statement is comprised of the LIBOR Rate and the Monetary Policy Assessment. The general consensus is that the SNB will remain on hold at 2.75%.

The final high volatility event of the week will come at 23:45 on Thursday night from New Zealand. The Current Account balance is expected to have fallen further into negative territory to $ -3.4B from $ -2.2B last month.

Friday promises to be a quiet day, especially in the New York session. Early volatility will be seen when BOC Deputy Governor Murray speaks in Toronto and later on for the German PPI number. However, both of these events are only classified with a medium volatility rating.

Our Visual Analysis and Historical Data tool will come into use this week with the US Core CPI supported.

For all the latest numbers and updates please check our economic calendar and expect a breakdown of the US Core CPI right here on Tuesday.

The US Producer Price Index (PPI) came in worse than expected for the month of August, the Bureau of Labor Statistics reported today.

The PPI for Finished Goods came in at -0.9% MoM compared to the -0.5% that had been expected. This seasonally adjusted figure compares to the 1.2% and 1.8% increases seen in July and June respectively. Today’s number represents the first downturn in wholesale inflation since December 2007.

Looking at the year-over-year numbers we can see that inflation has risen by 9.6%, 2 ticks lower than the 9.8% YoY growth reported for July.

The main contributing factor to August’s number was the sharp fall in energy prices. Month-over-month energy prices were down by 4.6% compared to an increase of 3.1% in the previous month. Food prices remained firm posting a 0.3% increase for the second month in a row.

The Core PPI, which strips out the volatile Energy and Food components, came out in line with expectations 0.2%. This means that the unadjusted yearly rate of 3.6% remains at the highest level seen since May 1991. 

Elsewhere the lesser important Intermediate Goods posted -1.0% growth for July and Crude Goods a much larger -11.9%.

Today’s data left the US Dollar slightly lower across the board. At the time of writing the EURUSD is at 1.4222 compared to the 1.4000 it had been at 24 hours earlier. GBPUSD was up to 1.7943 from 1.7577. It should be noted however that Retail Sales data contributed to these price moves also.
 

Last week was a key week in terms of economic indicators. We saw central bank interest rate announcements from the RBA, BOC, BOE and ECB and key employment data from the US.

All interest rate announcements came in as expected but US employment data managed to surprise to the downside. Non-Farm Payrolls fell more than expected (-84K) for August and the Unemployment Rate jumped from 5.7 to 6.1%. This represents the highest rate since September 2003.

Despite this negative US economic news the Dollar remained firm, supported by carry trade unwinding and a further fall in oil prices. NYMEX crude oil posted a weekly low through the $110 level at $105.13.

This Week
Early market focus will be centred on a rumoured announcement from US Treasury Secretary Paulson due on Sunday evening. It is expected that he will announce a plan for the US Government to take control of Fannie Mae and Freddie Mac for at least a year.

This week will also play host to a 3-day OPEC meeting that takes place in Vienna. Running from Monday through to Wednesday, the main body of the programme is scheduled for Tuesday. Traders will be watching for any unscheduled announcements made to the press throughout the 3 days.

Monday begins with an RBA testimony before the House of Representatives Standing Committee on Economics. Lead by Glenn Stevens, the RBA will testify on the latest semi-annual economic outlook.

At 09:30 the UK PPI Input number is due for release. The number is expected to fall by 1.2% after a -0.6% reading for July.

Later in the day we have a high volatility event from Canada. Building Permits will be released and further contraction is expected. July saw -5.3% and a further -1.0% is expected from August.

Tuesday will bring us more high volatility with Australian data first up. At 02:30 we will see both Home Loans and Retail Sales. Home Loans posted a -3.7% for July and a month-over-month 0.0% move is anticipated for the month of August. Retail sales, on the other hand, are expected to post a mild recovery. July figures were reported at -1.0% but numbers for August should show a 0.5% increase.

In the UK session traders will be focussed on Manufacturing Production. A number of -0.1% is anticipated after a -0.5% report in the previous month.

Further Canadian construction data is due on Tuesday at 13:15. It comes in the form of the Housing Starts report and is expected to show 194K new residential constructions getting underway. This would be an improvement from the 187K annualized reported in August.

The first high volatility economic indicator from the US is scheduled for release at 15:00 on Tuesday. Pending Home Sales MoM are likely to have fallen by 1.2% in August after a 5.3% increase in July.

On Wednesday we will see the first high volatility event from the Eurozone. ECB President Trichet will testify before the European Parliament Committee on Economic and Monetary Affairs in Brussels.

Towards the end of the day (22:00) we have the RBNZ Interest Rate Announcement. It is expected that the RBNZ will cut interest rates for the second time in 2 meetings to 7.75%. This will be an interesting event because the last cut (happened back on the 23rd of July) surprised most market participants.

Thursday is often the busiest day in terms of economic releases and this week is no exception. For the second time in 3 days Australia leads the field with two high volatility events at 02:30. This time Employment Change and Unemployment Rate are to be reported. Employment Change is expected to come in at 5.5K jobs created while Unemployment Rate could increase from 4.3% to 4.4%.

Thursday will also play host to the third central bank testimony of the week. The BOE MPC, including Mervyn King, will testify on the August 2008 Inflation Report before the UK Treasury Committee at 09:45.

At 13:30 we have a high volatility announcement from Canada and the US. Both countries will be reporting their latest Trade Balance figures. Canada is expected to report a surplus of $5.6B from $5.8B in the previous month while the US deficit is likely to increase to $58B from $56.8B previously reported.

Finally for Thursday we have Core Retail Sales and Retail Sales from New Zealand. Last month’s Core number came in flat at 0.0% while the raw number posted a 0.9% gain. This month data is expected at 0.2% and -0.3% for Core Retail Sales and Retail Sales respectively.

Friday will be dominated by high volatility data from the United States. At 13:30 we will see Core Retail Sales, Retail Sales and PPI (supported by our Visual Analysis tool). Core Retail Sales are expected to contract by 0.2% MoM while Retail Sales should be up by 0.2%. The Producer Price Index is expected at -0.5% after last month’s 1.2% gain.

At 14:55 we have the final high volatility announcement from the US and for the week in the shape of the preliminary University of Michigan Consumer Sentiment. Sentiment is expected to increase to 64 from last month’s revised figure of 63.

For full details of this week’s economic news and daily updates please see our economic calendar and economic speeches pages.