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📌 Focus on Tomorrow’s U.S. FOMC; Today’s Watch Is U.S. Retail Sales

📌 Focus on Tomorrow’s U.S. FOMC; Today’s Watch Is U.S. Retail Sales

🏦 Central Bank Week Overview

  • This week brings a cluster of key policy announcements: FOMC and Bank of Canada (rate cuts expected, –25bp baseline), BOE and BOJ (widely seen on hold).

  • Last week’s ECB hold decision reinforced policy divergence, which tends to fuel dollar selling pressure.

  • However, U.S. equities remain firm, and capital inflows may still support the dollar.

💱 FX & Political Focus

  • The yen outlook hinges on the BOJ meeting and the LDP leadership race:

    • If Takaichi leads: fiscal expansion expectations → yen weakness.

    • If Koizumi or others gain ground: political uncertainty → yen strength.

  • Still, “political market” reactions tend to be short-lived.

🇺🇸 FOMC Expectations

  • A 25bp rate cut is fully priced in.

  • Some speculation of a 50bp cut, though seen as politically driven; if delivered, it could spark a sharp USD sell-off on fears of weakened Fed independence.

  • Consensus remains for a measured –25bp cut.

📊 Today’s Data Highlights

  • 🇩🇪 Germany ZEW Economic Sentiment (Sept)

  • 🇪🇺 Eurozone Industrial Production (July)

  • 🇨🇦 Canada Housing Starts (Aug), CPI (Aug)

  • 🇺🇸 U.S. Retail Sales (Aug) → key gauge of consumption

  • 🇺🇸 U.S. Import/Export Prices (Aug), Industrial Production (Aug), Business Inventories (July), NAHB Housing Market Index (Sept)

👉 Retail sales are closely watched, but with the FOMC looming, market moves are likely short-lived.

⚠️ Geopolitical Risks & Gold Surge

  • Russia and Belarus launched joint military drills Zapad 2025, widely perceived as offensive exercises aimed at Europe.

  • Multiple drone incursions reported over Polish and Romanian airspace, heightening NATO–Russia tensions.

  • Safe-haven demand, coupled with a softer dollar, is pushing gold toward $3,700, testing historic highs.

🗣 Other Events

  • Lithuania’s Simkus and Spain’s Escrivá to present economic outlooks.

  • U.S. 20-year bond auction ($13bn).

📉 Dollar Index Update

  • Continues to weaken.

  • Topped at 97.388 in Tokyo afternoon before sliding toward 97.009, nearing a major break below 97.

  • This marks the weakest level since July 7.

✅ Summary:
Markets are calm ahead of tomorrow’s FOMC, with U.S. retail sales in focus today. Dollar sentiment remains fragile as the DXY flirts with a July low, while gold rallies on a potent mix of dollar weakness + geopolitical tension.

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