• MON: EZ Sentix Index (Sep), US Labour Day, US Unemployment Benefits end
• TUE: RBA Policy Decision; German ZEW Survey (Sep); EZ GDP R (Q2); Chinese Trade Balance (Aug)
• WED: BoC Policy Decision; Japanese GDP R (Q2); EIA STEO
• THU: ECB Policy Decision; Chinese Inflation (Aug); German Trade Balance (Jul)
• FRI: CBR Policy Decision; German CPI Final (Aug); UK GDP Estimate (Jul); US PPI (Aug); Canadian Labour Market Report (Aug)

NOTE: Previews are listed in day-order

RBA POLICY DECISION (TUE): The focus of the announcement will be the decision on QE. The Cash Rate is expected to be maintained at 10bps. At the prior meeting (and against expectations at the time), the board stood by its taper decision, which would see the weekly purchases at AUD 4bln (vs current AUD 5bln) from early September. Since then, the COVID situation has drastically deteriorated. Westpac believes that the board will now be getting advice that the Q3 contraction will be greater than the previously expected 1%. The minutes from the July meeting however did signal QE flexibility, but at the same time, the July decision was meant to signal confidence in monetary policy. Analysts Westpac “fully expect that the taper commitment will be deferred”, whilst a “better” response will be to lift QE to AUD 6bln from AUD 5bln.

CHINESE TRADE BALANCE (TUE): The trade balance is expected to narrow slightly to a surplus of USD 48bln vs 56.58bln in July. Desks expect double-digit growth in the import and export figures, although it is also worth being cognizant of the COVID outbreak which shuttered China’s key Ningbo-Zhoushan port – one of the busiest in the world. This is expected to provide some downside pressure on the August metrics. “These supply chain disruptions may fade by mid-September or October, but we expect the backlog could affect the US Thanksgiving shopping season”, ING said.

BOC POLICY DECISION (WED): No major changes are expected from the BoC at its pre-election, statement-only meeting. The unexpected contraction in Q2 might have thrown a spanner into the works of the BoC's normalisation plan, particularly since the prospects for Q3 also have given the need for caution, according to Scotiabank. The GDP downside in Q2 was a result of unexpected revisions, but that has meant that slack has widened, accordingly, Scotia said, and argues that this will require the BoC to reassess the timeline of when it sees the output gap fully shutting (in July, it estimated that the output gap was currently between -2.6% and -3.4%, and Scotia thinks that after the soft Q2 GDP data, it might now be somewhere between -3.5% and -4.5%, and thinks the gap won't close until at least the end of next year -- that might result in the BoC being more patient in its approach to end bond purchases). But for this meeting, the BoC may be a non-event: "The decision is 12 days before the federal election. Governor Macklem—appointed by Prime Minister Trudeau—speaks the next day and the tight connections between the central bank and government policy plus a history of staying out of the fray during election campaigns should make it a non-event for the most part," Scotia said, "if you were expecting a taper in September then it was meaningful, but I’m not sure how many were in that camp, and the BoC is likely to look on to the next full meeting in October when a full forecast reassessment will be offered." NOTE: Governor Macklem will give remarks the day after the BoC meeting when he delivers the economic progress report.

ECB POLICY DECISION (THU): Policymakers are expected to stand pat on rates once again whilst leaving the size of its PEPP envelope at EUR 1.85trl, with purchases set to run until at least the end of March 2022. Although the size of the envelope is set to be left untouched, market participants are focused on the level of purchases set to be carried out in Q4, and what will happen to the Bank’s emergency bond-buying when the programme draws to a close. On the former, the June meeting saw a rollover of the level of purchases in Q2 into Q3 (at circa EUR 80bln/month), which were conducted at a "significantly higher pace than during the first months of the year." This time around, UBS expects the Executive Board will opt to slow the pace of purchases to EUR 50-60bln, which would be “roughly on par with the pace in Q1, which [chief economist] Mr Lane remarked was also ‘pretty high’.” The ECB has been given cover to make such a decision given that financing conditions in the Eurozone are perceived to be easier than at the time of the June meeting. Note, Lane has already downplayed the upcoming decision as a "local adjustment." With regards to “life after PEPP,” those looking for any clues on this are likely to be left disappointed, with Lane already noting that it is too early to discuss the conclusion of PEPP, and discussion on the matter is set to take place in the Autumn. The meeting will take place against the backdrop of a pronounced jump in headline and core inflation, which poses some upside risk to the Bank’s view that such price pressures were likely to be “transitory.” Policymakers have looked to downplay such risks by pointing towards the lack of notable wage growth in the region. Activity data for August saw the EZ-wide composite PMI slip to 59.0 from 60.2; IHS Markit noted “…another strong quarter-on-quarter rise in GDP is on the cards for the third quarter, and we’re certainly on track for the eurozone economy to be back at pre-pandemic levels by the end of the year, if not sooner." For the accompanying economic forecasts, UBS looks for an upgrade to the 2021 GDP metric from 4.6% to 5.0% amid the strong performance seen in H1. Next year’s projection is set to see a modest downgrade to 4.6% from 4.7% amid softer-than-anticipated spill overs from H2 2021, whilst 2023 should remain at 2.1%. On the inflation front, UBS expects 2021 to be upgraded to 2.1% from 1.9% with 2022 and 2023 set to be raised by 10bps each to 1.6% and 1.5% respectively with the latter projection still below-target for the ECB.

CHINESE INFLATION (THU): Both consumer prices and factory-gate prices are expected to have remained elevated in August, with the CPI M/M expected at 0.5% (prev. 0.3%), CPI Y/Y at 1.0% (prev. 1.0%), and the PPI Y/Y at 8.8% (prev. 9.0%). The mild PPI cooling expected comes amidst China’s crackdown on the broader industrial metals market, with the nation recently releasing the third batch of copper, aluminium, and zinc from reserves in a bid to control prices, and limit the follow-through to consumer prices. That being said, expected PPI remains near recent highs after May and June printed 9.0% and 8.8% respectively. Using the latest Caixin PMIs as proxies, the Services release noted “August survey data signalled a slower increase in cost burdens faced by Chinese service providers. Input prices rose modestly overall, which was largely linked to higher staffing costs, but also increased transport fees.”, whilst the Manufacturing highlighted that “Higher raw material prices and greater transportation costs drove a further marked rise in overall input prices. The rate of cost inflation picked up for the first time in three months and was sharp overall. At the same time, factory gate prices rose only modestly, despite the rate of increase picking up since July.”

CBR POLICY DECISION (FRI): Following July's 100bps rate hike to 6.50%, the CBR will likely lift rates again next week, which would be the fifth time this year. At this week's monetary policy report, the CBR Deputy Governor largely stuck to language from the July meeting statement that the bank would consider rate rises stating that "the base scenario envisages the average key rate level in the range of 6-7% in 2022, which also envisages the possibility of its further increase from the current level"; note, the July statement left the door open to a hike at one of the next three policy meetings ("will consider the necessity of further key rate increase at its upcoming meetings" if the economy progresses in line with its forecasts). This week's monetary policy report said the bank sees inflation between 5.7-6.2% this year (it left that forecast unchanged) slowing to a 4-4.5% rate next year (unch), and coming back to the 4% target in 2023; it sees growth of 4-4.5% this year (unch), and 2-3% next year (also unch). A poll by Reuters in late August showed analysts expect a rate rise of at least 25bps next week.

UK GDP ESTIMATE (FRI): Expectations are for the pace of monthly growth to slow to 0.7% M/M after +1.0% M/M observed in June. By July, the bulk of the reopening efforts were already carried out, and therefore, the latest release should begin to characterise a return to slightly more ‘normal’ growth levels within the UK. Looking ahead, RBC (which forecasts +0.6% M/M growth in July) expects a Q3 outturn of 2.7% Q/Q but cautions that major uncertainties have been presented in the near-term by labour and material shortages. From a policy perspective, the upcoming release is unlikely to have too much sway on the MPC as policymakers await further details from the aforementioned uncertainties ahead of the Bank's APF purchases drawing to a close by the end of the year.

CANADIAN LABOUR MARKET REPORT (FRI): Canadian bank RBC expects that the Canadian labour market recovery will have continued, and looks for 100k jobs to be added to the economy in August, following 325k job additions in the June and July jobs reports. "Reopenings continued across most provinces in mid-to-late July, with the impact likely to be mostly captured in this month’s report," RBC explains, "the job gain should once again be driven by improvement in hard-hit services industries, while ongoing supply chain disruptions and labour shortages are likely to limit job growth on the goods side." In terms of policy implications, the BoC wants to see labour market improvement in the sectors which have been hardest hit by the pandemic, while it has also noted persistently high long-term unemployment as an area it is watching. RBC also looks for the jobless rate to fall to 7.2% from 7.5%, but sees the size of the labour force growing by around 60k in the month, which it says implies that the unemployment rate fall is more modest than it otherwise would be.