1. FROM JACKSON HOLE TO G20
Central bankers from all over the world will leave behind the mountain air of the state of Wyoming, where they are for the Jackson Hole symposium organized by the US Federal Reserve (Fed), and go to Asheville, North Carolina, for the G20 meeting to be held on Monday and Tuesday.
The fact that Bank of Japan (BOJ) Governor Kazuo Ueda, who did not attend Jackson Hole, will attend the G20 meeting drew the attention of investors to this meeting. Ueda is expected to attend the G20 meeting together with Japan’s finance minister.
While tensions in the Middle East continue to be at the center of the agenda, markets will closely follow the meetings of the Fed and BOJ in September.
In Europe, while France is preparing for difficult budget negotiations again, the local elections to be held in Germany may weaken Prime Minister Friedrich Merz’s hand.
Investors are also already focused on the budget to be prepared in the UK and the midterm elections in the USA.
2. WEAK DOLLAR POLICY
Treasury bond markets in the US also worry investors. As US Treasury Secretary Scott Bessent tries to bring down US borrowing costs, bond market traders may test Bessent.
On the other hand, ideas regarding “devaluing the dollar” have also been put forward in recent days.
According to this idea, while the US Treasury will reduce long-term borrowing costs with bond buybacks, investors will price their concerns about the country’s debt exceeding $40 trillion with dollar transactions.
Although the dollar and U.S. Treasury bonds have stabilized in recent days after a sharp sell-off, the views on weakening the dollar have not slowed down and market observers are skeptical about the impact of a $4 billion buyback on the market.
Gold rose 13 percent in August, recording its best monthly performance since 1999. Bitcoin also rose above $80,000 on Tuesday.
3. HOT OR COLD
Non-farm employment data to be announced later in the day in the USA will provide information about whether the country’s employment market is weak or not. It will show whether last month’s weaker-than-expected employment data in the US is a one-off situation.
Employment is expected to rise by 45,000 in August after falling by an unexpected 23,000 in July, according to a Reuters poll.
Although weak data in July calmed market concerns about short-term interest rate hikes, Fed futures point to a more than 50 percent chance of a rate hike by the end of the year.
Data released this week showed that inflation continues to remain above the Fed’s 2 percent target. Other economic data to be announced next week includes data on the manufacturing and service sectors.
On the other hand, after the balance sheet announced by the semiconductor industry giant Nvidia revealed that the strong demand for artificial intelligence expenditures continues, the balance sheet to be announced by Broadcom next week will be closely watched.
4. HIGH INFLATION CONTINUES
While the upward pressure on prices continues, the Reserve Bank of New Zealand is expected to increase the policy rate to 2.75 percent at its Wednesday meeting.
Annual inflation in New Zealand rose to a two-and-a-half-year high due to a sharp rise in fuel prices in the second quarter of the year. While there is no sign that the war between Iran and the USA in the Middle East will end, energy costs are not thought to decrease anytime soon.
The Bank of Canada will also announce its interest rate decision on the same day next week. The central bank is expected to keep the policy rate steady until the middle of next year as price pressures are largely under control. However, the collapse of negotiations with the USA on additional customs duties without reaching an agreement creates uncertainty about the future course of the economy.
5. CONCERNS IN THE EURO AREA
Inflation in the euro area is expected to rise to 3.3 percent in August, the fastest increase in nearly three years, due to the impact of high energy prices.
The European Central Bank (ECB) will also closely monitor the inflation data to be announced on Tuesday. According to the calculation, which does not include fluctuating food and energy prices, inflation is expected to be close to the ECB’s 2 percent target, but still slightly above the target.
The ECB is concerned that high energy prices will have a wider impact on inflation.
Traders predict that the ECB will increase interest rates at its monetary policy meeting in September. Although the inflation data to be announced on Tuesday will shape long-term expectations, the inflation data must be very low for the expectations for the September meeting to change.
Markets are pricing that the ECB will raise interest rates again in early 2027, but sources speaking to Reuters stated that central bank officials will not want to give a message that interest rate increases will continue at the meeting in September.
Another element to watch in the European Union (EU) will be the referendum to be held in Iceland tomorrow on re-joining the EU.
