Week Ahead for FX, Bonds: Fed Minutes in Focus as Near-Term Rate-Hike Prospects Dim

By Dow Jones Newswires staff

Below are the most important global events likely to affect FX and bond markets in the week starting October 5.

Minutes from the U.S. Federal Reserve will be in focus as investors gauge the likely timing of a further interest-rate hike after weak U.S. jobs data dented prospects of another increase as early as this month.

Eurozone data will also receive attention after concerns over France's fiscal and political troubles caused French bond-yield spreads to widen sharply.

In Asia, India's central bank decision takes center stage as higher energy prices complicate the outlook for interest rates. Investors will watch for clues for the Bank of Japan's next rate increase, while China's markets reopen after the Golden Week holiday.

U.S.

The Federal Reserve's minutes for its September meeting, when interest rates were hiked amid concerns about elevated energy prices, are due Wednesday and will mark the highlight of the coming week.

Investors will look for clues on the likely timing of a further rate increase, particularly after recent much weaker-than-expected U.S. jobs data dampened prospects of a follow-up rate hike on Oct. 28. U.S. money markets on Friday priced the probability of an October rate increase at just 18%, having priced a 70% chance of this happening only a few days earlier, LSEG data showed.

U.S. nonfarm payrolls rose just 29,000 in September, well below the 84,000 increase expected by economists polled by The Wall Street Journal.

"The report is likely to reignite the debate over whether the labor market is strong enough to absorb further policy tightening after the Fed's recent rate increase," said Daniele Antonucci, head of investment and chief strategist at Quintet Private Bank in a note.

ING analysts said the data further diminish the chances of an October rate hike.

"December remains the most likely date for the next move. We continue to believe market pricing for additional action is too aggressive," they said in a note. Markets priced at least three rate increases over the next 12 months.

Investors will also parse economic data, where any signs of weakness could further dampen rate-hike expectations. The ISM data on services activity in September is due on Monday, followed by August trade data on Tuesday, weekly jobless claims Thursday and the University of Michigan's preliminary October sentiment survey on Friday.

U.S. government bond moves will continue to be watched closely after 10-year and 30-year Treasury yields surged to multiyear highs in recent days.

Canada

Canadian jobs data for September are due Friday.

The report "should show a partial rebound which will probably keep markets anticipating a December rate hike," ING economist James Knightley said in a note.

The Bank of Canada policy rate is relatively low at 2.25%, Canada has not suffered the same sort of surge in government borrowing costs that other economies have faced, and the Canadian dollar has weakened throughout September. That should allow "scope for modest policy tightening in the coming months," he said.

Canadian trade data for August are due Tuesday.

One event of interest will be an Oct. 5 provincial election in Quebec, which might see the sovereigntist Parti Quebecois replace the current Coalition Avenir Quebec government, while a nonbinding referendum in Alberta Oct. 19 will gauge support for a future binding vote on separation.

Separatist movements in Canada may have only limited support but they can still create uncertainty that weighs on business confidence and distracts from other policy priorities, Morningstar DBRS's Travis Shaw said.

Eurozone

Eurozone economic data due in the coming week will be watched against the backdrop of bond-market worries. France's recent budget proposal sparked fiscal and political concerns that lifted French 10-year bond yields to their highest since 2002, while their spreads over their German equivalents soared.

"We suspect that bond market nervousness will remain in the near term," Investec economists said in a note.

Data will include the final estimate of French, German and eurozone services purchasing managers' indexes for September on Monday. This will be followed Tuesday by eurozone August retail sales figures, German August manufacturing orders and French August industrial production data.

"Euro area retail sales and German industrial orders should give insight into how the European economy is faring with higher energy costs," Danske Bank analysts said in a note.

German August industrial production figures are released Wednesday.

Also of interest will be the European Central Bank's accounts of its September meeting, due on Thursday, when the central bank raised interest rates. Investors will be looking for clues on when rates could rise again.

Recent eurozone inflation data gave indications that high energy prices were feeding through into higher prices elsewhere in the economy. Markets priced a 26% chance of a quarter-point rate increase on Oct. 29 and priced up to three increases over the next 12 months, LSEG data showed.

Germany is due to auction bonds maturing in 2028 and 2033 in the coming week.

U.K.

The coming week is a quiet one for U.K. data, with the only major release being the final estimate of the services purchasing managers' index for September on Monday.

The U.K. will auction September 2035 index-linked gilts on Tuesday. On Wednesday, it will sell July 2031 gilts by programmatic gilt tender and January 2028 gilts by ad-hoc gilt tender.

Scandinavia

Norway's latest inflation data for September are due on Friday.

Inflation rose to a four-month high of 3.3% in August from 3.0% in July. Core inflation rose to 3.0% from 2.7%. Last month, Norges Bank raised interest rates by 25 basis points to 4.5% and said it was prepared to deliver further tightening to bring inflation down to the 2% target.

Poland

Poland's central bank announces its policy decision on Wednesday.

ING economists expect the National Bank of Poland to leave interest rates unchanged with the reference rate remaining at 3.75%. While headline inflation accelerated above the NBP's target in September, this was driven by an external energy shock with no clear signs of broader inflationary pressures, they said. Core inflation likely declined last month, they said.

"This means policymakers still have some time before taking any policy action," they said. "We believe the debate on monetary tightening may begin in November, when the NBP publishes its new staff macroeconomic projections."

ING expects rates to remain unchanged for the rest of this year, although it sees scope for 50 basis points of rate hikes in early 2027.

Japan

Investors seeking clues about when the Bank of Japan will next raise interest rates will focus on Gov. Kazuo Ueda's speech on Tuesday and the central bank's branch managers' meeting on Thursday, when it will release its quarterly regional economic report.

The government is slated to release August current-account data on Thursday and household spending figures for the same month on Friday.

The Bank of Japan is scheduled to buy government bonds across three maturity segments on Wednesday: up to one year, more than one year to three years, and more than 10 years to 25 years. The purchases are expected to support the domestic bond market.

The Ministry of Finance is scheduled to auction about 2.6 trillion yen of 10-year government bonds on Tuesday and around 600 billion yen of 30-year debt on Thursday. The latter auction may draw greater investor interest given the higher yields likely to be available.

Australia / New Zealand

A quiet week for Australian economic data will leave global developments to set the direction for government bonds. September purchasing managers' index data are due Wednesday, followed by October's consumer inflation expectations survey on Thursday.

Australia's 10-year government bond yield sits just below a 15-year high, and traders expect further upward pressure if Middle East tensions intensify. The Pentagon's deployment of a third carrier group and 10,000 Marines to the region has heightened concerns about conflict. Strong U.S. data could also push bond yields higher.

China

China's sole major economic data release is September foreign-exchange reserves on Wednesday, leaving investors focused on the reopening of markets after the Golden Week holiday.

Catch-up trading could bring volatility to equities as investors reposition. The usual tally of domestic tourism activity during the holiday will be of particular interest, UOB economists said.

Holiday spending on travel and services offers a gauge of consumer demand, which remains weak amid a persistent property slump and subdued confidence. Investors will also watch retail sales figures and booking numbers from major online platforms.

Trade talks with the European Union are also due during the week, against a backdrop of persistent friction over the wide trade gap between the two sides. Previous talks have yet to resolve key issues surrounding what the EU calls unfair trade practices. Chinese officials have said they will respond in kind to any export restrictions from Brussels.

India

The Reserve Bank of India will announce its closely watched monetary policy decision on Wednesday amid rising inflation and strong economic growth.

Recent economic data support a rate increase, though the decision is likely to be a close call, said Capital Economics economist Shilan Shah. A sharp pickup in September's final manufacturing purchasing managers' index from August will have offered the RBI some relief, he said. Meanwhile, mounting monsoon-related risks threaten to push food prices higher.

"While the inflation shock is largely supply-driven, we expect the RBI to raise rates to prevent inflation expectations from de-anchoring," ING economists said. "Markets will be focused on the RBI's guidance on the extent and duration of the tightening cycle," they added.

Taiwan

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October 02, 2026 12:05 ET (16:05 GMT)

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