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.

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.