It’s an understandably quieter week ahead after the blockbuster few days we enjoyed last week, with multiple central bank meetings that had been widely anticipated for some time. Numerous Fed speakers will be on the wires after what some on Wall Street called a ‘hawkish cut’ by the FOMC last Wednesday, and we watch how officials see the risks to the economy after signalling two further 25bps rate reductions this year and one more next year.

Importantly, if you believe that the bond market drives everything (like some of us here), the 10-year US Treasury yield found support around the 4% level, before bouncing for the first time in four weeks. The 10-year is the most widely quoted bond and is seen as a global proxy for borrowing costs. We have next big resistance around 4.20%, after the downside break earlier this month. There was a greater scattering of FOMC views with nearly half predicting only one more cut in 2025. Powell stated that the cut was a ‘risk management’ move, with the median growth and inflation forecasts notably revised higher for next year.

Higher Treasury yields saw the dollar rebound after making fresh long-term lows. We note a broad turn in interest rate differentials across most of the G10 currencies, reflecting a reassessment of the Fed’s path. The outsized reaction to last Thursday’s better-than-expected jobless claims data also revealed a market that appears vulnerable to a squeeze. It is one that is likely to be more volatile around economic releases as markets try and figure out the Fed’s ultimate reaction function. This should present lots of short-term trading opportunities in various markets.

US stocks and gold made more record highs with the small cap Russell 200 also joining in the party. The benchmark, broad-based S&P 500 has never been more concentrated in just ten stocks than it is today, with the biggest US companies representing over 38% of the index. Some say that the narrow breadth of stock market indices isn’t really an issue, until it is. It’s interesting that nine out of 10 hedge fund managers have net bought global tech stocks for five straight weeks and at a near record pace. A mild shake-out over October, a traditionally volatile month, would be healthy, into a bullish year-end.

In Brief: major data releases of the week

Tuesday, 23 September 2025

– Eurozone PMI: Manufacturing is predicted to tick higher to 51.0 from 50.7.  Services are seen unchanged at 50.5. Both gauges are sitting in expansionary territory, but growth is weak with the latter manufacturing seen as patchy and uneven. The weekly pin bar, potential shooting star, candlestick looks bearish in EUR/USD.

– UK PMI: Manufacturing is expected to slide to 46.9 from 47.0 due to fragile demand, while services are forecast to drop to 53.9 from 54.2. The rate of expansion in the most recent composite hit a one-year high as growth picked up over the summer.  Cable suffered similar price action to the euro last week, though didn’t make a new cycle high. Support may come at the 50-day and 100-day SMAs at 1.3462/77.

Wednesday, 24 September 2025

– Australia CPI: August monthly inflation is forecast to tick one-tenth higher to 2.9%. Base effects may cause an upside surprise, though prior high electricity costs should reverse in this data. AUD suffered its first weekly drop in four weeks, after printing an 11-month high and hitting resistance at the 200-week SMA at 0.6675. Major support resides around 0.6549.

Thursday, 25 September 2025

– Swiss National Bank (SNB) Meeting: The bank is likely to keep rates at 0%. Recent inflation data printed in line with expectations. The bar to dipping into negative rates territory is high, according to Chairman Schlegel. Stronger evidence is needed of cooler prices; with many analysts reckoning we are now at the terminal rate. USD/CHF printed a bullish pin bar at the bottom of a downtrend.

Friday, 26 September 2025

– Tokyo CPI: This leading indicator for national CPI is forecast to tick up two-tenths to 2.8% in August. The impact of rising food prices is set to cool. But sticky core inflation is being driven by demand-side pressure. USD/JPY is back in the range after the false breakdown last week. Support is the 100-day SMA at 146.23, resistance at the 200-day SMA at 148.81.

– US Core PCE: The Fed’s favoured inflation gauge is likely to rise 0.3% m/m and 2.9% y/y. The FOMC’s most recent median forecast saw the reading at 3.1% in 2025, but cooling to 2.6% next year. The pivot towards the employment side of the dual mandate was reiterated at last week’s meeting.