- Euro-area inflation scheduled to be released tomorrow is expected to show the headline rate falling below the ECB’s target rate in September and may help shape the outlook for interest rate cuts in the coming months. A sub 2% release would be the first since 2021, and a similar fall in services inflation would be a relief to ECB President Christine Lagarde and her colleagues on the General Council. The pace of cuts from both the Federal Reserve and the ECB hangs in the balance with the odds of a 25bp cut from the ECB currently hovering around 80%. Ongoing weakness in PMI’s, German ifo and subdued price pressures have pushed some analysts to suggest a terminal rate of 2% by June next year.
- The US labor market is back in focus this week, with the start of the month leading to a flurry of employment reports in the coming days, finishing with Friday’s Non-farm Payroll release. Markets remain wary of surprises in economic data however last week’s robust GDP report suggests the economy is on track for a soft landing. The labor stats kick off with tomorrow’s JOLTs job openings report which is expected to show that openings increased following a recent major downside surprise. Initial Claims are out on Thursday and Friday’s NFP is expected to show a significant improvement on last month’s disappointing reading of 142k. We also have a plethora of Fed speakers this week, including Chairman Powell, as well as ISM Manufacturing (Tue) and ISM Services Index (Thur). This week’s data will provide clues on the size of the next cut from the Fed, with markets currently expecting the central bank to downshift and announce smaller 25bp reductions.
- Elsewhere, the Chinese government announced further measures to prop up the embattled real estate sector after previously announcing its biggest package, aiming to end the ongoing property market slump. The downturn started around three years ago and has been dragging the economy lower, with the latest stimulus easing rules for homebuyers, with the government pledging to make the real estate market “stop declining.”
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