Markets will battle with US job worries and CPI data this week, with intensifying calls for immediate, and possibly bigger Fed rate cuts. The most important releases over the next few days are all related to US inflation. The August PPI, due on Wednesday, will provide markets with the first sense of how tariff-related costs have continued to build. Then on Thursday, the August CPI figures will illustrate how firms are passing through the cost increases to prices. Hotter numbers will see more talk about a toxic stagflationary environment, but Wall Street expect the data not to derail Fed policy easing coming soon.

Another soft non-farm payrolls report last Friday has seen traders in money markets price in around an 11% chance of a 50bps rate reduction at next week’s FOMC meeting. This could increase after Tuesday’s benchmark revisions to payrolls for the 12 months to March 2025, as economists reckon we could get at least 750k of downward revisions, which would further alter the cooling labour market theme. The dollar threatened to break down on Friday but still trades around 98 and its 50-day SMA. That is noteworthy and likely means we need to see a material chance of a 50bps cut to get near late July lows and the long-term bottom from July 1^st.  As we predicted last week, gold’s textbook breakout from the apex of a long-term triangle continued and it look like it’s game on for bugs.

Recent data prints will make the ECB’s job easy on Thursday. The Governing Council will stand pat, considering the solid data this year, reduced trade policy uncertainty and the overall shift towards a more hawkish stance. Markets agree with no moves priced for this year, and only a coin flip for another cut by next March. We will watch the fresh macro projections and the 2026 inflation forecasts which should be upgraded closer to the ECB’s target from the current 1.6%. EUR/USD will also have one eye on French politics with the no-confidence vote remaining the other important theme for the single currency in the coming days. Political uncertainty is set to remain elevated as President Macron decides the next PM. Volatility in French government bonds (OATs) would put pressure on the euro but the no-confidence outcome appears largely priced in at present.

In Brief: major data releases of the week

Tuesday, 9 September 2025

– French No-Confidence Vote: French PM Bayrou and his government are expected to fall with both the far right- and left-wing parties vowing to vote against the minority administration. President Macron will then choose a new Prime Minister or call for a snap election. Continued political uncertainty is likely to persist with little improvements in the public finances.

Thursday, 11 September 2025

– ECB Meeting: The ECB will leave the Deposit Rate unchanged at 2% with President Lagarde reiterating that policy remains in a good place. Inflation is close to target with core stable while better than expected macro data and a trade deal in place warrants no rush to adjust policy. Updated staff projections will be a focus.

– US CPI: The headline print is expected to rise one-tenth to 0.3% m/m and 2.9% y/y in August. The core is forecast steady at 0.3% m/m, and 3.1% y/y. Evidence of any tariff impact will be watched. Higher core goods prices will likely be offset by softer rents and energy prices.

Friday, 12 September 2025

– UK GDP: Growth is expected to print three-tenths lower at 0.1% in July. That would see the Q2 reading at 0.3%, somewhat lower than the 0.7% pace from Q1 which was boosted by government consumption. Economists reckon Q3 could remain surprisingly solid with good weather helping.