Australian AiG Performance of Services (OCT)
Consensus: N/A
Previous: 50.2

Outlook: The Australian AiG Performance of Services PMI risks inching below 50 for the second time in four months, as a progressive slowdown in the domestic economy challenges initial expectations of growth. Indeed, the September reading remained a mere 0.2 points above the critical expansion/contraction level, effectively showing that the services industry remained flat through the month. A contributing factor to such a result was the input prices component, which continued its torrid pace with a reading of 72.3. Given that key commodity prices have fallen significantly since the survey was released, price growth is likely to contribute much less to Octoberâ�,��"�s reading. What remains to be seen is if a pickup in inventories will be enough to lift the headline figure in the face of lower prices. The inventories component dropped to 46.3 in September after remaining almost exactly at 50 for the two previous periods. Likewise related, recent gains in international sales could boost the corresponding reading for exports. We will wait and see where these conflicting price and inventory trends will take the broader services industry, which accounts for 75 percent of Australian GDP. 

Previous: The AiG Services PMI inched 0.2 points lower to 50.2 in September, as falling commodity prices put a dent in the Input Prices component of the result. Likewise significant, declines in Inventories and Deliveries weighed on the index. These results were enough to offset gains in the key Employment and Production factors, which rose to 55.3 and 53.5, respectively. The gain in service sector employment was perhaps the most noteworthy change from August to September, with the print above 50 as the first in over a year. What remains to be seen, however, is whether this improvement was an anomaly or the start of a new trend. Octoberâ�,��"�s result will shed more light on the labor market, with economists expecting slower growth moving forward.

BoE Rate Decision (OCT)
Consensus: 4.75%
Previous: 4.75%

Outlook: The Bank of England is widely expected to leave rates unchanged at its October meeting, as economists remain unconvinced that the MPC will feel the need to raise rates in light of recent economic data. Indeed, a Bloomberg News poll shows that 43 of 43 analysts surveyed expect the central bankâ�,��"�s key rate to stay at 4.75%. Regardless, uncertainty remains as official commentary has underlined inflationary risks to the broad UK economy. Minutes from the September meeting showed that members of the Monetary Policy Committee unanimously voted to keep rates unchanged, but the written statement highlighted worrying price trends and pushed synthetic interest rates to 5.25 percent by yearâ�,��"�s end. Those same interest rate futures reflect an approximately 30 percent chance of a 25 basis point hike for tomorrowâ�,��"�s announcement. Needless to say, such a move would almost certainly push the Pound higher against other currencies. In the more likely case that the MPC votes to keep rates the same, markets will have to wait two weeks for the official minutes of the meeting for a statement from the committee. Though tomorrowâ�,��"�s announcement will probably be a non-event, traders will brace themselves for an unexpected hike that would cause a jump in the GBP across all currency pairs.

ECB Rate Decision (11:45GMT; 7:45EST)
Consensus: 3.25%
Prior: 3.00%

Outlook: The European Central Bank is widely anticipated to raise their benchmark rate by 25 basis points to 3.25% as multiple council members, including Axel Weber, Gertrude Tumpel-Gugerell, and most importantly, ECB President Jean-Claude Trichet, have stressed the need for â�,��"strong vigilanceâ�,� in monetary policy. The central bank has remained optimistic about growth for the remainder of 2006 and quite hawkish on inflation, however, they have been more cautious in their outlooks for 2007. While annualized GDP posted at a better-than-expected 2.6% in Q2, consumer and producer price growth has edged lower in the second half of 2006 and has taken an edge off of the broader based inflation concerns. Furthermore, unemployment has started to tick higher to a rate of 7.9%. Although this is near a five-year low of 7.8%, signs of weakness in the labor market could indicate the potential for a slump in retail spending, especially following the completion of the World Cup in July. Consumer sentiment has managed to remain optimistic and could be a significant factor in maintaining stronger domestic demand, albeit at a slower pace as the impending VAT hike to 19% from 16% in Germany looms on the horizon in 2007. Due to Germanyâ�,��"�s status as Europeâ�,��"�s largest economy, the rise in taxes do not bode well for the rest of the Euro-zone, as a slowdown in growth is likely to resonate substantially. The proverbial nail in the coffin for this meeting, though, is money supply acceleration. Although M3 growth is not a top priority in the ECBâ�,��"�s monetary policy strategy, central bankers may still believe that the analysis of monetary developments provides important information on the medium term inflation outlook. With the most recent reading of M3 hitting the tape at 8.2% versus the central bankâ�,��"�s reference value of 4.5%, there is substantial upside risk for a rate hike.

Canadian Ivey PMI (SEP) (14:00GMT; 10:00EST)
Consensus: 60.0
Prior: 55.7

Outlook: The Ivey Purchasing Managers Index for the month of September is expected to rise to a reading of 60.0 from 55.7 in August. Since the index is not seasonally adjusted, it is subject to seasonal swings, and September is a month in which the figure typically rises. The price component should moderate given the pullback in energy prices during the month, but with the headline anticipated to post above 50, the manufacturing sector looks set remain expansionary.

Prior:  Ivey PMI for Canada unexpectedly slipped to a four-month low of 55.7 in August versus estimates of a rise to 61.4 from 60.1 in July. A breakdown of the data showed that supplier-deliveries measure fell to 42.9 from 45.5, indicating a slowdown as the figure is below the 50 boom/bust level. Meanwhile, the inventory gauge fell to 53 from 57 along with the employment index, which sank to 54.1 from 60.4, and does not bode well for the Canadian labor market overall. The only component to rise was the price index, which increased to 68.6 from 67.6 as a result of sustained high energy costs.

Richard Lee is a Currency Strategist at FXCM.