NEWS / Foreign Exchange

Interest rate decision and key data releases due in US

Financial market attention this week will be dominated by the Fed interest rate decision and a busy US data calendar, which includes preliminary Q3 gdp on Wednesday and the October labour market report on Friday. In the UK, the focus will be on the housing market, with September mortgage lending figures due today and the October Nationwide house price survey later in the week. It is a relatively quiet week for EU-13 data, headed up by the 'flash' CPI estimate for October on Wednesday. Interest rate decisions are due in Japan, Sweden and Norway this week, where there is the strong possibility that the Riksbank may hike rates to 4% on Tuesday.

• There are a host of other key data released in the US this week, which may elicit strong financial market reaction should they deviate far from consensus estimates. After falling surprisingly in September to the lowest level since November 2005, the consumer confidence index on Tuesday may struggle to rebound given continuing concerns about the housing market and rising oil prices. However, we forecast only a modest fall to 99.5 in October, primarily reflecting the resilient labour market. Ahead of the non-farm payrolls data on Friday, the ADP employment report on Wednesday will be eagerly awaited for any clues to the outcome. Data on the Fed's preferred inflation gauge, the core PCE deflator, is due on Wednesday and Thursday. We expect the annual rate to remain at 1.8% in September, close to the upper end of the Fed's 1%-2% implicit target range. Inflation risks should also be highlighted by hourly earnings data in the labour market report on Friday, with wage growth likely to remain close to 4% y/y.

• Data from the UK this week are expected to show a further slowdown in housing market activity in September. BoE mortgage approvals figures on Monday should show the sharp slowdown reported by the BBA last week, with the total market outturn forecast to have hit a two-year low of 103,000. However, net mortgage lending is forecast to have held up around ??8.5bn, reflecting strong approvals earlier in the year. Although we predict a 0.2% rise in house prices in October according to the Nationwide survey, the annual growth rate should ease to 8.5% - a year low. On Wednesday, we expect the Gfk consumer confidence index to fall to -8 in October, in line with the results of our own LTSB Corporate Markets Consumer Barometer survey, which showed weaker employment confidence in October. The manufacturing PMI, on Thursday, could show a modest fall, following on from the weak CBI survey last week. BoE MPC members Blanchflower and Bean speak on Tuesday and Wednesday, respectively.

• After rising above the ECB's 2% ceiling in September for the first time since August 2006, EU-13 consumer prices may have edged up to 2.3% in October, based on the outturn of preliminary German data last week.