Week ahead: 2-6 October

As we prepare for the trading week ahead, it’s essential to have a thorough understanding of the pivotal economic events and company reports that can significantly impact financial markets. Here’s an in-depth preview of what to watch out for the week ahead.

Monday, 2^nd October

US government shutdown

The week starts with a focus on the US as weekend efforts to avert a government shutdown look to have paid dividends. While past experience has shown us that such a shutdown may not always result in a hugely detrimental period for the US economy, the possibility of such an event had posed a risk for markets. However, with a short-term spending bill having been signed off by Senate, House, and the President, it appears the can has been kicked down the road once again.

Jerome Powell appearance

Jerome Powell is set to engage in a roundtable discussion with small business owners, workers, and community leaders in New York. The fact that the fed governor will answer questions from the public allows for a more candid and perhaps open discussion about where the economy and monetary policy could be heading.

Tuesday, 3^rd October

RBA rate decision

The forthcoming RBA rate decision is awaited with anticipation, especially given the August rise in Australian inflation (5.2%). However, the impact of that rise has been counterbalanced somewhat by a decrease in core metric, which fell to 5.5% from 5.8%. This meeting holds added significance as the new RBA governor, Michele Bullock, chairs it for the first time. With weakened retail sales signaling economic strain and around 600,000 fixed-rate mortgages set to expire by 2024, the RBA’s decision will be crucial. While many expect a “hold” verdict, the market remains vigilant for potential policy direction hints.

JOLTS job openings

In a week that will be dominated by the US jobs market, the JOLTS report provides the first insight for traders. Last month brought a surprise slump in job openings, which tumbled to a two-year low of 8.83 million. A continuation of this decline could be indicative of early signs of distress in the jobs market.

Wednesday, 4^th October

RBNZ rate decision

The RBNZ come into focus on Wednesday, with markets widely expecting to see another pause from the New Zealand central bank. Coming at a time when there are ongoing concerns around the Chinese real estate sector, and the impact of higher rates on the economy, it makes sense that we see another hold. However, with the bank retaining a data dependant outlook, any commentary that points towards further upside for rates could cause NZD to strengthen.

ADP non-farm payrolls

This private payrolls metric remains a thorn in the side for many analysts, with its correlation to Friday’s headline NFP figure proving to be tenuous at best. Last month we saw ADP payrolls decline for a second consecutive time, hitting a five month low of 177k. Further downside could drive dollar weakness, highlighting the need for the FOMC to hold off as the economy weakens. However, a better-than-expected reading could drive dollar strength.

Thursday, 5^th October

US unemployment claims

The US jobs focus continues, with weekly unemployment claims data highlighting the lack of any notable uptick in job losses of late. Recent declines have taken jobless claims down to levels not seen since the end of Q1, highlighting the relative strength in the US employment picture. Another figure around this 204k region would go a long way in providing confidence that there isn’t a major crisis unfolding.

Friday, 6^th October

US jobs report

The week crescendos into Friday’s US jobs report, with all eyes on the unemployment rate amid calls for a decline. Markets will be looking for reasons to be concerned or confident, and a decline in the unemployment rate would go a long way in highlighting the fact that any stress felt elsewhere in the economy has yet to make a tangible impact on the jobs market. Payrolls are expected to head lower for a fourth consecutive month, despite August already having brought the lower NFP figure since early-2021. Watch out for any notable move in the average earnings figure, which acts as a proxy for underlying inflation pressures. Markets are signalling a potential move lower, following last month’s reading of 4.3%.