• MON: PBoC LPR Announcement
• TUE: Riksbank & Hungarian Monetary Policy Decisions; EZ Consumer Confidence Flash (Sep); Tesla battery day
• WED: RBNZ & CNB Monetary Policy Decisions; German GfK Survey (Oct); EZ, UK and US Flash Markit PMIs, (Sep); New Zealand Trade Balance (Aug)
• THU: Special European Council Summit; SNB, Norges Bank & CBRT Monetary Policy Decisions; German Ifo, Survey (Sep); ECB TLTRO Allotment
• FRI: BoE Quarterly Bulletin (Q3); US Durable Goods (Aug)

EZ FLASH PMI (WED): Expectations for next week’s September flash PMIs are for the manufacturing release to tick modestly lower to 51.6 from 51.7 and services to 50.2 from 50.5, leaving the composite at 51.6 vs. prev. 51.7. The August update showed differing performances between the services and manufacturing industries, with the former indicating some signs of plateauing, whilst the latter expanded at its fasted pace since February 2016. RBC notes that the performance of the services sector was referenced by ECB President Lagarde at the September policy announcement, however, the minimal revision to the accompanying 2020 growth projection indicates that staff at the Bank do not foresee the loss of momentum continuing; for the upcoming release, RBC suggests that subsequently, greater focus will lie on the services component in order to validate this view. Note, the services sector could also fall victim to the spread of COVID-19 throughout the region and its impact on domestic activity and tourism for some of the southern states, and as such a divergence between the performance of various nations’ within the region could become a noteworthy theme in upcoming releases.

UK FLASH PMI (WED): Expectations for next week’s September flash PMIs are for the services print to fall to 56.0 from 58.8, manufacturing to tick lower to 54.0 from 55.2, leaving the composite at 56.5 vs. prev. 59.1. In similar vein to the Eurozone metrics, focus will largely fall on how sustainable the recent momentum in the services sector proves to be. Since the reopening efforts in early July, optimism surrounding the sector has been high, however, given the composition of diffusion indices and the low base provided at the peak of the crisis, some scaling back in the performance of PMIs is to be expected. The question is the extent of this scaling back, given the slightly more upbeat appraisal of the UK economy provided by the MPC in its most recent policy announcement compared to August, whilst also noting the uncertainty that lies ahead. The curtailing of the government’s furlough scheme has been a known event for some time now and marks a clear headwind, however, one source of interest for upcoming releases will also be on how the mounting COVID-19 cases impair the expectations of purchasing managers as various lockdown measures are reimposed on the UK economy. Any deterioration in activity data will likely provide food for thought on the MPC as desks still flag the likelihood of a further expansion to the balance sheet in November with analysts also having to factor in the ongoing newsflow surrounding Brexit, albeit it is unclear how much recent concerns over the UK Internal Market Bill will play into the upcoming release given that its impact on negotiations between the UK and EU remains uncertain at this stage.

EU SPECIAL SUMMIT (THU): European leaders will convene on 24th and 25th of September in Brussels. The press release from the Commission states that EU leaders will focus on “1) going back to a fully functioning single market as soon as possible, 2) making the EU's industries more competitive globally and increasing their autonomy and 3) accelerating the digital transition”. Leaders will also discuss a range of geopolitical issues including China – following the recent meeting between EU leaders and Chinese President Xi, whilst the situation in Turkey will also be discussed amid the Eastern Mediterranean standoff with Greece. Reports noted that the EU Parliament is to warn Turkey of the possibility for further sanctions, with a non-binding input to be discussed at the summit. Other topics that could be up for discussion could include the Belarus and Russia, although this was not explicitly mentioned in the press release. Leaders took Brexit off the agenda amid a lack of progress in EU-UK negotiations, although it will not be surprising to see a drip-feed of comments at leaders’ arrivals on the issues after the UK government put the Internal Market Bill back under review.

SNB POLICY DECISION (THU): The SNB is likely to maintain rates at -0.75% after making it clear that FX interventions and commentary around the Swiss Franc are their preferred policy tools at this stage. In June, the SNB downgraded the classification of the CHF to ‘highly valued’ from ‘even more highly valued’ which was a move that had been essentially announced by Governor Jordan in a speech prior to the gathering. Since the meeting, Governor Jordan has once again commented on the CHF but refrained from altering its classification; reiterating the usual language around a willingness to intervene for as long as the CHF is of such a value. At the previous meeting EUR/CHF was around 1.0666 (for reference, Jordan’s classification altering speech prior to the meeting had the cross around 1.0604), since then, the CHF has depreciated slightly against the EUR and is currently residing around the 1.0750 mark. Given the high uncertainty ahead regarding COVID-19 alongside upcoming global events, the most pertinent of which being the US Election, it would perhaps be pre-emptive for the Bank to alter the Franc’s classification as the possibility of appreciation ahead remains plausible. On interventions, focus is on whether the SNB continues its justification of such actions and emphasize it’s not for domestic benefit and as such they are not acting as currency manipulators; a theme which is continually in focus given Switzerland satisfies much, if not all, of the US’ checklist to be deemed a FX manipulator. Elsewhere, the previous meeting made no mention of the tiering multiplier, currently 30x, which is perhaps now not sufficient given the substantial FX interventions taking place and the associated sight deposit burden on banks. Finally, the June forecasts for both CPI and GDP were unsurprisingly downgraded in June from the March release; CPI has been increasing over the last few months at a gradual pace and in August came in at -0.9% YY, moving closer to the SNB’s current 2020 forecast of -0.7% which is unlikely to change much this time around. Further out UBS points to possible upside risk for the 2021 and 2022 CPI forecasts. Note, the September meeting does not include a press conference.

NORGES BANK POLICY DECISION (THU): The Norges Bank is expected to maintain its key policy rate at 0.0%; this month’s release is accompanied by a monetary policy report and as such we will receive updated forecasts from the Norges Bank. The Q3 regional network report seemingly confirms that the pick-up in economic activity has occurred faster than projected; however, and likely due to the substantial uncertainty in the path ahead given potential COVID-19 second wave fears, respondents look for growth to be weak and momentum to slow over the next ~6-months. Data wise, the most recent hard data points have been a touch softer than market expectations and down from Prev. releases such as mainland GDP for July, albeit caveated by Stats Norway that July is typically a ‘vacation’ month for industry and even given this, the 3-month average is increasing; nonetheless, the overall readings have been broadly in-line with the Norges Bank forecasts. As such, the Bank is likely to reiterate that developments have been in-fitting with their projections and this assessment may well be reflected by little changes to forecasts. Elsewhere, commentary from officials has been sparse with nothing from Governor Olsen and the only notable line aside from this via members expressing a reluctance to cut rates further, which is very much in-fitting with the broader Bank’s stance; therefore, policy guidance will likely be a reiteration of August’s view.

RIKSBANK POLICY DECISION (TUE): The Riksbank is expected to keep policy rates on hold at 0.00%. In July, the bank increased asset purchases to SEK 500bln vs. Prev. SEK 300bln with the period for such purchases pushed out until June 2021 alongside commencing corporate bond purchases of SEK 10bln. Additional smaller policy tweaks accompanied these measures. In the subsequent minutes, members noted the situation remains fragile and as such did not rule out a rate cut if required; since then a number of members, notably Governor Ingves, have intimated that they would be willing to reduce rates if required. Given such commentary and the high levels of uncertainty in the Riksbank’s own outlook a rate reduction cannot be entirely ruled out; but, desks are largely aligned in the narrative that it is too soon for such a move to occur – and, as has been the general theme for the Riksbank, would be more likely to feature further into the recovery phase to assist inflation. Data wise, the all-important CPIF for August came in above the Riksbank’s own expectations (but missed market exp.) and Q2 GDP beat market expectations while the unemployment rate has been steady which all together paints a cautiously firmer picture for the Swedish economy from the shock of the COVID-19 crisis; potentially to be reflected via positive updates to their forecasts for the year.

US DURABLE GOODS POLICY DECISION (FRI): Headline Durable Goods Orders for August are expected to rise by 1.5%, compared to July’s 11.4% rally. Core Durable Goods are seen rising 2% (prev. +2.6%), and Non-Defense ex-Air are expected to rise by the same pace as July at 1.9%. Similar to a lot of manufacturing data, the record bounce off the standstill seen on the back of the initial COVID breakout is expected to plateau. It’s worth remembering that Durable Goods is heavily distorted by Boeing’s production woes, with the company reporting eight new orders in August although cancellations rose by 20. Credit Suisse notes that motor vehicles should remain an upside pressure due to orders and shipments recovering from outsized losses in the spring, although that pace should be more muted after three months of double-digit growth. The bank also sees a tamer +0.5% rise in core capital goods shipments (Non-Defense ex-Air), which is an input to business equipment spending, given orders and shipments have almost recovered to their pre-COVID levels. More broadly, Credit Suisse believes that uncertainty on the path of the virus and election should cap the scope of further recovery in capex.

CBRT POLICY DECISION (THU): There is currently no consensus with regards to the CBRT’s next move, which comes against the backdrop of record low TRY exchange rates, deep negative real rates, prospect of EU sanctions and concerns over central bank independence. To recap the prior meeting, The Turkish Central Bank opted to stand pat on all rates, with the one-week repo rate at 8.25%, in line with the median expectation, although there were outside calls for hikes to the lending overnight lending rate alongside the late liquidity window. Furthermore, the bank also reiterated its cautious stance and reaffirmed emphasis “that any new data or information may lead the Committee to revise its stance.” The CBRT also noted that, uncertainties regarding domestic and external demand conditions remain significant but does not warrant a change in rate, whilst liquidity measures will be continued. The central bank avoided a rate hike by tightening Lira liquidity, while the most recent comments from the CBRT did not commit to further tightening measures. “We think the MPC will eventually deliver an outright rate hike; for now, we pencil that in for 2021, although the risk is that the market developments might lead to an earlier hike”, Credit Suisse writes. Analyst expectations for an emergency/scheduled hike has grown in light of USD/TRY breaching 7.5000 to the upside in recent days.

HUNGARIAN CENTRAL BANK (TUE): The Hungarian Central Bank (NBH) is seen standing pat on its Base rate at 0.6% by all analysts polled by Reuters, with the overnight depo rate also forecast to be unchanged at -0.05%. Sources recently noted that the economic recovery in the country is expected to be slower than originally expected, whilst the central bank is also running out of tools to fuel the economy. Q2 GDP posted a contraction of some 13.6% QQ, while YY CPI printed at 3.9% in August which resides towards the top of the NBH’s 2-4% target band. The COVID-19 resurgence in the country also poses a tough landscape for the government as it attempts to balance a fragile economy with necessary restriction measures. The deputy governor of the Bank also remarked that the pandemic has lifted inflation and there was little room for the Base Rate to be lowered further. The monetary policy decision will also be accompanied with the latest economic forecast, which is expected to show downgrades to both 2020 GDP and CPI. ING stated that the central bank is likely to focus on the inflation story, “but just using words and not actions”.

PBOC LPR ANNOUNCEMENT (MON): The PBoC is anticipated to maintain its benchmark lending rates for a 5th consecutive month, with the 1-Year Loan Prime Rate (LPR) expected to be held at 3.85% and 5-Year at 4.65%, with almost 90% of respondents surveyed by a major newswire calling for rates to be held. Consensus for the central bank to keep the LPRs unchanged has been supported by the continued improvement in economic releases from China including Industrial Production, Retail Sales, Exports and most PMI figures - which backs the notion of China being the first in and first out of the COVID-19 fallout. The central bank has also refrained from any adjustments to the LPR and its closely tied 1-Year Medium-term Lending Facility (MLF) rate since April, which points to the unlikelihood of any changes to its benchmark rate given that the central bank had previously lowered the MLF rate first in the last 3 occasions prior to reducing its LPR . Instead, the PBoC have opted to conduct policy through liquidity operations, this was evident during the past week in which the central bank conducted a CNY 600bln MLF operation vs. CNY 200bln maturing, with Nomura noting that the net MLF injection of CNY 400bln was equal to a 25bps RRR cut, and clearly suggests a preference to add liquidity through lower profile measures. Furthermore, the PBoC recently committed to push ahead with further reforms to the LPR as it seeks to shift from a “dual-track” interest rate system to a “single-track” to bring bank deposit and lending interest rates in line with market-determined rates and in an effort to further cut borrowing costs, which could result to adjustments once the additional reforms are conducted. However, this would likely be preceded first by an adjustment to MLF rate first.

RBNZ POLICY DECISION (WED): The RBNZ is expected to maintain the Official Cash Rate unchanged at 0.25%, with OIS pricing in a 96% chance for rates to be maintained and just a 4% probability of a 25bps cut, while the central bank is also expected to maintain its current QE settings. The one-sided expectations follows the central bank’s policy actions last month in which it widened Large Scale Asset Purchases to NZD 100bln through to June 2022 from Prev. NZD 60bln to May 2021, while it stuck to a dovish tone stating it would provide additional stimulus as necessary and continued to actively prepare a package of additional policy tools including negative rates. Aside from NIRP, policymakers have further elaborated on potential measures,  with Governor Orr noting that options include more QE, direct lending to banks and ongoing forward guidance, while Assistant Governor Hawkesby suggested that a funding for lending programme, foreign asset purchases and interest rate swaps also remain possibilities. Officials are clearly seen to be open to launching multiple policy measures simultaneously with the MPC in agreement that any future reduction in rates, if complemented by a funding for lending programme, could provide an effective way to deliver stimulus, although this is not anticipated to be immediate as they had given banks this year to prepare for negative rates and intended to conduct assessments towards the year-end on banks’ capabilities to operate with zero or negative interest rates on the RBNZ’s standing facilities, ESAS balances, financial market securities such as bank bills, bonds, interest rate swaps and non-retail products. Therefore, a rollout is unlikely until the assessment is complete and given that the central bank has been explicitly clear with its current guidance that it is to maintain rates at current levels through to March next year. However, after the guidance period, the floodgates for negative rates are seen to be widely open with the likes of ANZ Bank and BNZ forecasting the RBNZ to lower the OCR into negative territory in April next year and the latter anticipating a deeper cut to -0.5% in August next year, while Kiwibank suggested NIRP could be launched as early as February. Focus at the upcoming meeting will therefore be on the statement for any clues of an earlier launch of new measures and for any currency jawboning, as well as comments on the economy after New Zealand recently slipped into a technical recession for the first time since 2010.

TESLA BATTERY DAY (TUE): Tesla’s battery day is expected to be a key catalyst for the automaker and the wider risk tone given its dominance in the NDX. There are diverse expectations among analysts(although almost all optimistic) over exactly what will be revealed concerning its new batteries and innovation in its manufacturing line. Credit Suisse believes the event will showcase batteries as a pillar of Tesla’s growth strategy over the next two decades. The bank sees the event shedding light on three aspects of Tesla’s path forward: 1) vehicle sales, 2) stationary storage, and 3) supplier to others. Core to those three factors will be how much progress Tesla has made on expanding future battery capacity compared to its current access to c.60 GWh, with the Co. previously mentioning intentions to more than 30x that figure into the 2 TWh region. This battery growth would support the Co’s ambitions of selling 20mln vehicles per year, which is 40x its current output, and would also make the Co. twice the size of Toyota, the world’s largest automaker. Given Tesla’s parabolic appreciation in recent months, investors are already beginning to price in this outcome, with the question becoming one of whether the company living up to its high expectations.