The recent economic data has reinforced the notion that "bad news is bad news," with the S&P 500 experiencing its worst week since the 2023 regional banking scare. This downturn came as the August jobs report fell short of expectations, with Nonfarm Payrolls rising by only 142,000 compared to the forecast of 160,000.
The mixed labor market data failed to rejuvenate investor appetite, leaving market participants to reassess the soft landing narrative. As a result, risk sentiments remain highly sensitive to any downside economic surprises. This cautious sentiment was also reflected in the gold market, where prices stalled their post-NFP retracement slide from near all-time highs.
Looking ahead to the new week, investors are bracing for several key economic releases that could potentially reshape market dynamics.
🇬🇧 Claimant Count Change — September 10, at 09:00 GMT+3
The UK is set to release its latest Claimant Count Change data, a crucial indicator of unemployment trends in the country. This monthly report measures the change in the number of people claiming unemployment benefits, providing vital insights into the health of the British labor market.
Analysts are forecasting a figure of 89.6K for the upcoming release, which would represent a significant decrease from the previous month's reading of 135.0K.
In anticipation of this release, the Pound Sterling has been gaining ground, with traders eyeing the 1.3200 level against major counterparts. This upward momentum reflects growing optimism as the UK economic calendar gathers steam.
🇬🇧 GDP m/m — September 11, at 09:00 GMT+3
The United Kingdom is set to release its monthly Gross Domestic Product (GDP) data, a key indicator of the country's economic health.
Analysts are expecting the figure to remain unchanged from the previous month, suggesting economic stability.
The GDP data is crucial for investors and policymakers, as it provides insights into the overall economic performance and can influence the Bank of England's monetary policy decisions. A result in line with expectations might support the current trajectory of the Pound Sterling, while any surprise deviation could lead to notable market movements.
🇺🇸 CPI and Core CPI m/m — September 11, at 15:30 GMT+3
U.S. inflation continued its downward trend in July, with the annual headline rate cooling to 2.9%, its lowest since March 2021 and below the expected 3%. Core inflation, excluding volatile food and energy prices, eased to a three-year low of 3.2%, matching market expectations.
For August, analysts anticipate headline inflation to further decrease to 2.6%, while core inflation is projected to remain at 3.2% year-over-year. These forecasts suggest ongoing moderation in price pressures across the economy.
In response to this trend, financial markets are pricing in potential Federal Reserve policy changes. Current expectations reflect a 35 basis point rate cut by September, with a total of 109 basis points in reductions anticipated by year-end. This outlook suggests growing market confidence in the Fed's ability to pivot towards a more accommodative stance as inflation continues to ease.
🇪🇺 ECB Interest Rate Decision — September 12, at 15:15 GMT+3
In June 2023, the European Central Bank (ECB) implemented a 25 basis point interest rate reduction, bringing its deposit rate down to 3.75%. This decision was underpinned by growing confidence in the easing of inflationary pressures. The ECB then maintained rates at their subsequent meeting, signaling that September's gathering would be pivotal.
Current market expectations fully anticipate another 25 basis point rate cut from the ECB this month. This outlook has been bolstered by decelerating wage growth in the previous quarter, alleviating policymakers' concerns about escalating labor costs. Furthermore, Eurozone inflation's sharp decline to a three-year low of 2.2% in August has reinforced this sentiment.
Investors will be keenly observing any indications regarding future policy direction. Opinion remains divided on whether consecutive rate reductions for the remainder of the year are justified.
🇺🇸 PPI and Core PPI m/m — September 12, at 15:30 GMT+3
The United States is preparing to release its Producer Price Index (PPI) and Core PPI data, which measure the average change in selling prices received by domestic producers for their output.
Forecasts suggest a decrease of 0.2% for both PPI and Core PPI, contrasting with the previous month's 0.1% increase.
Market focus is particularly on stock markets and the EUR/USD currency pair ahead of this release. A lower-than-expected PPI could be seen as positive for equities, as it might reduce pressure on the Federal Reserve to maintain tight monetary policy. For the EUR/USD, a softer PPI could potentially weaken the dollar if it leads to expectations of a less hawkish Fed stance.
That's it for this week! 👋
