Week of SEPTEMBER 9TH

Last week focused on the Nonfarm Payrolls report, with prior labour data released causing some unrest. The BOC also went ahead with an interest rate cut, as anticipated.

The upcoming week will include inflation statistics from the US, an ECB interest rate decision and employment figures from the UK.​

THE Week in Review

Markets experienced volatility early in the week as trading resumed in the US following the Labour Day holiday. Share prices declined sharply on Tuesday and fluctuated over subsequent days as investors reacted to new employment data and awaited the important Nonfarm payrolls report. The ADP employment change figure was disappointing, falling to its lowest level in three years.

In Europe, the BOE's MPC lowered its inflation projections for this year but upgraded expectations for the next. Over the week, ECB speakers' views were mixed regarding the likelihood of an interest rate reduction at the upcoming monetary policy meeting. In addition, German factory orders unexpectedly grew, though this was attributed to some large one-off orders; underlying demand was negative. Finally, the French President nominated the former Brexit negotiator Michel Barnier as Prime Minister.

In Asia, Japanese wages rose by 3.6% year-on-year (YOY), matching forecasts. China's official manufacturing PMI remained in contraction territory for August, whereas the private Caixin survey returned to expansion.

It was reported that OPEC+ may postpone ending oil production cuts by two additional months due to falling prices.

A proposed merger in the American steel sector entered political discussions in geopolitics. Canada's governing coalition was reduced after losing an alliance partner, NDP.​

Biggest Market Movers

• Oil prices tumbled by 5% due to concerns over demand and a potential political agreement to restart production in Libya.
• The euro rose relative to the British pound over the week as markets anticipated greater interest rate cuts from the BOE than from the ECB.
• USDJPY lost over 2% following weaker US data and comments from BOJ board member Hajime Takata, who stated that the bank's rate rise in July was justified.​

Top Events in the Week Ahead

Next week will be full of macroeconomic reports, though the Federal Reserve will enter a period of silence over the weekend before its upcoming interest rate decision.

ECB Expected to Cut by 25bps

The ECB will be the main focus, as they are widely anticipated to lower interest rates at their meeting on Thursday despite reports of a growing difference of opinion between policymakers focused on inflation and those concerned about the risk of recession. The guidance the central bank provides is likely to attract significant attention, as it may indicate which side of the debate around further easing measures holds more influence. However, analysts have also speculated that ECB President Christine Lagarde may try to find a middle ground and refrain from providing a clear outlook, instead emphasising the bank's reliance on incoming economic data.​ EURUSD hovers around the 20-week MA of 1.1060, with next levels presented at 1.12 and 1.098.

US Inflation Expected to Remain Stable

Following last week's employment situation report, which set the stage for the Federal Reserve's interest rate decision on September 18th, US inflation is projected to maintain the current outlook for monetary easing. Headline CPI is expected to drop slightly to 2.6% from the prior 2.9% figure. Core inflation, excluding volatile food and energy prices, is forecasted to remain at 3.2%. Missing estimates could see gold accelerate towards $2600 per ounce, with a hotter read opening the door to $2450.

UK Job Market and Economic Growth Continue to Improve

On Tuesday, the ONS is expected to report a significant reduction in unemployment benefit claims to 21000 after a sizable increase of 135000 in the previous month. The unemployment rate is projected to stay steady at 4.2%, while average earnings growth is predicted to continue easing to 4.2% from 4.5% earlier. The following day, the UK is anticipated to report monthly GDP growth of 0.2%, lifting annual expansion to 1.3% and further widening the divergence with continental Europe. This separation could mean the BOE needs to slow the pace of monetary policy easing relative to current expectations.​After a positive week for cable, traders will focus on 1.3270 and whether confirming a more dovish stance leads prices lower towards 1.2981.

Other Events and Earnings

On Monday, China will release inflation data. Tuesday will see Australian Westpac consumer confidence figures as well as a speech from BOC Governor Tiff Macklem. Wednesday there will be Japanese machine tool orders data. The United States will publish PPI figures on Thursday. Friday brings the University of Michigan consumer sentiment index.

Several companies, including Oracle, GameStop, Cracker Barrel, Adobe, and Lennar, will provide investors with updates next week.​