As we move into the second week of September, investors are preparing for a potentially volatile period, with a series of key economic data releases, corporate updates, and central bank developments on the horizon.
With inflation and interest rate concerns continuing to dominate market sentiment, this week’s events will play a critical role in shaping the market’s trajectory as we head into the final quarter of the year.
KEY ECONOMIC INDICATORS
U.S inflation data in focus:
The main event of the week will be the U.S. Consumer Price Index (CPI) report for August, set to be released on Wednesday. Investors will closely monitor this data to gauge whether inflationary pressures are easing or persisting.
Any surprises could have a significant impact on expectations for future Federal Reserve interest rate decisions, particularly with the Fed’s September meeting approaching.
Core CPI (MoM/YoY):
The June 2024 Consumer Price Index (CPI) fell by 0.1% month-over-month (MoM) and rose by 3.0% year-over-year (YoY).
The softer inflation data, coupled with June’s employment report, which underscores a balanced labour market with signs of easing, are welcomed developments for the Fed that should increase their confidence inflation is on its way back to the 2% target.
ECB Interest Rate Decision (September):
The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. It will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.
The ECB will hold its policy meeting on Thursday, with expectations that it will hold the main refinancing rate, the interest rate on the marginal lending facility, and the deposit facility at 4.25%, 4.50%, and 3.75%, respectively.
ECB (European Central Bank) interest rate decision:
The annual inflation rate in the US slowed for a fourth consecutive month to 2.9% in July 2024, the lowest since March 2021, compared to 3% in June and below forecasts of 3%.
The CPI increased 0.2%, rebounding from a 0.1% drop in June, and matching forecasts. Meanwhile, annual core inflation also slowed for a fourth consecutive month to 3.2%, the lowest reading since April 2021.
CURRENCIES
EUR/USD:
S1-S3 – Means potential Support points. If the market declines further, these are the potential levels it can reach.
R1-R3 – Means potential Resistance points. If the market starts to increase again, these are the potential levels it can reach.
German CPI (MoM)
The Consumer Price Index (CPI), released by the German statistics office Destatis on a monthly basis, measures the average price change for all goods and services purchased by households for consumption purposes.
The CPI is the main indicator to measure inflation and changes in purchasing trends. The MoM figure compares the prices of goods in the reference month to the previous month.
A high reading is bullish for the Euro (EUR), while a low reading is bearish.
EUR/GBP
XAU/USD
Gold pulls away from near-record highs and holds above $2,500
Gold came within a touching distance of a new all-time high near $2,530 as US Treasury bond yields turned south on disappointing US jobs data.
Gold’s rise this year has surpassed other commodities, such as oil and copper, distinguishing it in global markets.
Market instruments to look out for this week:
EUR/USD
EUR/GBP
Nasdaq100
XAU/USD
S&P 500
MARKET NEWS
Citi, Bank of America see oil prices potentially going to $60
Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.
OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025.
Separately, Bank of America’s Commodities Research team has revised down its Brent oil price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.
August payrolls grew by a less-than-expected 142,000, but the unemployment rate ticked down to 4.2%
Nonfarm payrolls expanded by 142,000 during August, down from 89,000 in July and below the 161,000 consensus forecast.
The unemployment rate ticked down to 4.2%, as expected. However, the “real” unemployment rate increased to 7.9%, its highest reading since October 2021.
The previous two months saw substantial downward revisions. The BLS cut July’s total by 25,000, while June fell to 118,000, a downward revision of 61,000.
Average hourly earnings increased by 0.4% on the month and 3.8% from a year ago, both higher than the respective estimates of 0.3% and 3.7%.
EUR/USD surrenders gains and declines below 1.1100 after US NFP data
EUR/USD falls back below 1.1100 as the US Dollar bounces back strong despite signs of a slowdown in US labour demand.
Traders remain split over the Fed’s likely interest rate cut size.
The ECB is expected to cut interest rates two more times this year.
