All eyes are on the Federal Reserve and whether it will use this week’s September FOMC meeting to announce its long-awaited tapering of asset purchases. Meanwhile a hot inflation reading last week will have the Bank of England thinking about whether it should be pivoting to a more hawkish position.  

Fed to announce QE taper? 

Whilst markets do not expect the Federal Reserve to race towards tapering asset purchases, there is a broad consensus in the market that it will begin dialling back the pace of its QE programme from November. That means this week’s meeting may be an appropriate moment for the Fed to give the market fair warning. 

Last week’s CPI inflation clouded the outlook a touch – it was a little softer than expected, giving the Fed some more breathing space. More importantly, the very weak August jobs report suggests the Fed might not want to nail its colours to a November taper launch just yet. It could signal it still believes that tapering is appropriate this year without giving a fixed schedule. 

Investors will be most interested in how policymakers assess the pace of the labour market recovery, and whether they believe inflationary pressures are becoming less transitory than they thought. Close attention will be paid the latest round of economic projections for a guide on whether the Fed is changing its mind on the pace of inflation and growth. 

Bank of England responds to hot inflation print 

The Bank of England will need to respond to biggest jump in inflation on record when it convenes this week. Inflation accelerated to 3.2% in August from 2% in July, well above the central bank’s 2% target. Could this force the BoE to tighten monetary policy sooner than had been expected? A hawkish-sounding Bank of England would be a boost for sterling. 

Eco data to watch 

In addition to the above, markets will be on the hook for a raft of economic data releases this week, including Thursday’s round of flash PMIs for the euro area, UK and US. The Bank of Japan is due to meet, with governor Kuroda recently remarking that the central bank will further relax monetary policy such as by reducing interest rates, if necessary. 

Nike, FedEx earnings 

The earnings calendar is light but there are updates from Nike and FedEx among others. Nike posted very strong Q4 results in June, sending the stock to a record high. Q4 sales rose 96% against the year-ago quarter and were up 21% compared to 2019. Margins are also improving fast as the company’s pivot to supplying consumers directly pays off. “FY21 was a pivotal year for NIKE as we brought our Consumer Direct Acceleration strategy to life across the marketplace,” CEO John Donahoe said. But shares have come off lately amid worries about supply chain problems, with millions of units of lost production in Vietnam due to covid. 

“Over its history, Nike’s stock has been most tightly correlated with sales growth, so with growing evidence that sales will likely stall, we believe Nike’s stock will at best tread water until more clarity is had around its manufacturing issues, and at worst suffer from reduced sales guidance and ensuing multiple compression,” BTIG analysts said in a note downgrading the stock to neutral. 

Also look out for earnings from Adobe, General Mills and Costco. 

Major economic events 

Mon Sep 20	12:01am	GBP	Rightmove HPI m/m
	All Day	JPY	Japan Bank Holiday
	All Day	CNH	China Bank Holiday
	7:00am	EUR	German PPI m/m
	Tentative	EUR	German Buba Monthly Report
	3:00pm	USD	NAHB Housing Market Index
	All Day	CAD	Canada Federal Election
	10:00pm	NZD	Westpac Consumer Sentiment
Tue Sep 21	All Day	CNH	China Bank Holiday
	2:30am	AUD	Monetary Policy Meeting Minutes
	7:00am	CHF	Trade Balance
		GBP	Public Sector Net Borrowing
	11:00am	GBP	CBI Industrial Order Expectations
	1:30pm	CAD	NHPI m/m
		USD	Building Permits
		USD	Current Account
		USD	Housing Starts
	2:00pm	CNH	CB Leading Index m/m
	3:30pm	AUD	CB Leading Index m/m
	Tentative	NZD	GDT Price Index
Wed Sep 22	Tentative	JPY	Monetary Policy Statement
	Tentative	JPY	BOJ Policy Rate
	Tentative	JPY	BOJ Press Conference
	2:00pm	CHF	SNB Quarterly Bulletin
	3:00pm	EUR	Consumer Confidence
		USD	Existing Home Sales
	3:30pm	Oil	Crude Oil Inventories
	7:00pm	USD	FOMC Economic Projections
		USD	FOMC Monetary Policy Statement
	7:30pm	USD	FOMC Press Conference
Thu Sep 23	12:00am	AUD	Flash Manufacturing PMI
		AUD	Flash Services PMI
	All Day	JPY	Japan Bank Holiday
	Tentative	EUR	German Import Prices m/m
	8:15am	EUR	French Flash Manufacturing PMI
		EUR	French Flash Services PMI
	8:30am	CHF	SNB Monetary Policy Assessment
		CHF	SNB Policy Rate
		EUR	German Flash Manufacturing PMI
		EUR	German Flash Services PMI
	9:00am	EUR	Flash Manufacturing PMI
		EUR	Flash Services PMI
		EUR	ECB Economic Bulletin
	9:30am	GBP	UK Flash Manufacturing PMI
		GBP	UK Flash Services PMI
	12:00pm	GBP	Bank of England monetary policy decision
	1:30pm	CAD	Core Retail Sales m/m
		CAD	Retail Sales m/m
		USD	US unemployment Claims
	2:45pm	USD	US Flash Manufacturing PMI
		USD	US Flash Services PMI
	3:00pm	USD	CB Leading Index m/m
	3:30pm	Nat Gas	Natural Gas Storage
	10:45pm	NZD	Trade Balance
Fri Sep 24	12:01am	GBP	GfK Consumer Confidence
	12:30am	JPY	National Core CPI y/y
	1:30am	JPY	Flash Manufacturing PMI
	7:00am	EUR	German GfK Consumer Climate
	9:00am	EUR	German ifo Business Climate
	3:00pm	USD	New Home Sales