Forex Weekly Market Outlook

Weekly Market Outlook: RBA & RBNZ Rate Hikes, NFP Report in Focus!

Weekly Market Outlook — All eyes will be on the antipodean central banks’ October policy decisions. However, it is expected that the US jobs report will steal the spotlight amid anticipations of when the Federal Reserve will reach its peak level of hawkishness. Australian and New Zealand reserve banks might be more inclined to maintain their aggressive pace of tightening in the aftermath of the latest panic in the markets and the renewed rush to buy US dollars. Having suffered from a dollar rampage recently, investors will probably be hoping for soft jobs report this time.

Key Data to watch on the Economic Calendar this week


  • US: ISM Manufacturing PMI (SEP) 


  • RBA Interest Rate Decision 
  • US JOLTS Job Openings 


  • OPEC+ Meeting 
  • RBNZ Interest Rate Decision 
  • US ISM Non-Manufacturing PMI (SEP) 


  • EU Retail Sales (AUG) 


  • Canada Employment Change (SEP) 
  • US Non-Farm Payrolls (SEP) 

USD — Strong NFP isn’t always a good sign

Following the recent turmoil over worries about the UK economy, traders may find the upcoming nonfarm payrolls report to be a welcome distraction as central banks continue to hike rates. In the United States, however, attention will be focused on the ISM manufacturing and non-manufacturing PMIs due on Monday and Wednesday, respectively.  

The American economy shows no signs of material damage despite three consecutive quarter-point rate increases by the Fed. The ISM PMIs have held up relatively well despite discrepancies between business surveys. In the event that this continues into September, market bets on a 75-bps gain in November would be confirmed.  

Weekly Market Outlook - AximTrade

A more important criterion for the Fed is the labour market. While inflation and the labour market remain strong, the Fed will see no reason to slow down the pace of tightening. It is therefore likely that Friday’s jobs report will be a major deciding factor before the decision in November. The consensus estimate for September is for nonfarm payrolls to have increased by 250k compared to 315k in August. In September, average hourly earnings are expected to have increased by 0.3% month-over-month, while the unemployment rate is expected to remain at 3.7%. 

Although a strong labour market is essential in maintaining confidence in the economy, investors would probably welcome a slight cooling down at this point as this could pave the way for the Fed to move into a lower gear, potentially putting a break on the dollar’s advances. Conversely, a further strong report may worsen the turmoil in bond and equity markets, boosting the dollar as bets on a more aggressive Fed rise. 

AUD — RBA may begin to ease off the brakes

Following four consecutive increases of 50 basis points, many are expecting the Reserve Bank of Australia to increase interest rates by 25 basis points in October. 

According to Governor Lowe, the Bank is getting closer to the point where it won’t have to raise interest rates by 50 bps anymore, but the exact distance will likely be determined at the meeting. Due to the RBA’s previous tightening and the fact that the RBA meets more frequently than other central banks, a 25-bps increase seems reasonable. However, policymakers may not want to let up on their fight against inflation as markets have been turbulent and the Australian dollar has been falling. 

Nonetheless, even if the RBA raised rates by 50 basis points, it would not necessarily boost the aussie and it would remain vulnerable to a risk-on market environment. 

NZD — RBNZ will likely maintain 50-bps increments

On Wednesday, the Reserve Bank of New Zealand will announce its policy decision. It is expected that the RBNZ will maintain the pace of raising the cash rate by 50 basis points, similarly to how it did in the last four meetings. In spite of this, they’ve priced in an approximately 20% probability of a 75-bps rate hike, which appears highly unlikely given that New Zealand’s rates are already among the highest in the world’s major advanced economies.  

Moreover, Governor Adrian Orr has recently remarked that despite the fact the tightening cycle is “very mature”, he also stressed that there is still work to be done through the rest of the year. 

Last month, the RBNZ raised its forecast for the terminal rate to 4.1%, suggesting another 100-125bps of rate hikes by mid-2023. There is a possibility that policymakers will opt for an even bigger 75 bps in light of the dramatic fall of the New Zealand dollar, but that could result in a further slump in the country’s housing market. 

CAD — October jobs report reveals hike size

Keeping with commodity-linked currencies, Friday’s unemployment numbers will be a highlight for the Canadian dollar. As with the RBA and RBNZ, the Bank of Canada is likely to face a similar dilemma when it meets in just under a month, and the October employment report will offer clues about how much to raise rates. 

As Canada’s economy has lost jobs for three months in a row, the odds of another 25-bps rate increase may rise if September’s reading is even worse than expected. However, even then, the consensus is likely to remain at 50 bps, as the Bank of Canada hasn’t shifted its hawkish tone. Thus, the loonie is unlikely to react much to the data.

Euro & Pound on shaky ground

In the last week, both the euro and pound made new lows, with the pound plummeting to record lows against the US dollar. Their recovery may run out of steam if there are no major drivers in the coming week. 

European traders will likely be looking for any hints on the rate path in the minutes of the European Central Bank’s September policy meeting on Thursday. ECB officials are expected to hike 75 basis points once again in October, but investors will measure the appetite for further large increases after that. 

Weekly Market Outlook - AximTrade

Although there isn’t much in the way of economic news in the UK, headlines about the government’s disastrous budget keep flowing out. In spite of the Bank of England’s emergency scheme to purchase long-dated bonds, the market situation remains fragile. Another BoE rate hike may be in store if volatility returns, and this may result in an unscheduled hike. 

Whatever the case may be, the euro and pound are not out of the woods yet as far as their downfall is concerned, owing to energy shortages. 

OPEC+ will likely reduce output as oil prices fall

On Wednesday, the OPEC+ alliance will hold its monthly meeting, and there is talk that major producers will decide to cut production again. In reality, the reduction will likely be much larger than the symbolic 100k barrels per day agreed in September, with Russia proposing a reduction of 1 million barrels per day. 

In recent months, oil prices have been falling steadily, and a greater-than-expected cut in production could push them higher. Additionally, it would weigh on wider risk sentiment since one of the few positives for investors lately has been the decline in energy prices. 

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