It is not too uncommon to see the ECB not hog the spotlight during policy decision weeks. But when it is accompanied by a change in rates, that is a bit uncommon. This week though will be one of those weeks, as the ECB has already well telegraphed a 25 bps rate cut for this month.

So, the question now is what will come next?

For now, arguably more of the same. They can’t pre-commit to another move just yet and they cannot outright declare victory against inflation just yet.

The good news perhaps is that the economy is not slowing at a recession-like pace, forcing them to go faster in the cycle. It seems like things are just about right for the ECB at the moment.

Some policymakers have come out to say that one rate cut every quarter seems to be ideal currently. And I don’t think Lagarde will want to fight that this week. She may not be explicit about it but she surely won’t rule it out either. That considering the recent progress in economic developments.

As such, there won’t be much to scrutinise from the ECB policy decision this week. That unless we do get a surprise in terms of language from Lagarde. But by now, she should not make such a rookie mistake.

Market players are pricing in ~63 bps of rate cuts for the remaining three meetings this year. That just means it’s a toss up between two 25 bps rate cuts or three. And that will depend on the data in the weeks and month ahead, more so than the ECB decision.

This article was written by Justin Low at www.forexlive.com.

This erases the jump from the previous month and is the 32nd straight month that the index remains below its 50-year average of 98. Looking at the details, the most notable is a jump in the uncertainty index to 92 – up 2 points from July. That’s the highest reading since October 2020. It is perhaps a signal of volatility anticipation, especially with markets playing push and pull on Fed rate pricing and the elections coming up.

This article was written by Justin Low at www.forexlive.com.

It’s been a brutal month
for crude oil as renewed growth fears pushed the market into new lows. The
negative supply news from Libya
and Iraq,
and the delay by OPEC+ to increase production from October
didn’t help much to slow down the bearish momentum.

The markets have been
waiting for the US NFP to get some more clarity on the labour market
but instead we got a mixed report with some better details under the hood. That
should be good news at the margin as the Fed is still going to ease policy into
a resilient economy.

The positioning in crude
oil is at a record 13 years low and a contrarian would see this as an
opportunity to go against the consensus with the Fed’s easing likely spurring
activity in the manufacturing sector and increasing demand.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil sold off all the way down to the 67.68 low where it consolidated
since last Friday. This is where we can expect the buyers to step in with a
defined risk below the level to position for a pullback into the 71.67 level.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into the 64 support
zone.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline defining the bearish momentum. We
can expect the sellers to keep leaning on the trendline to position for further
downside, while the buyers will want to see the price breaking higher to
increase the bullish bets into the 71.67 resistance.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we now have a tight range between the 67.60 support and the 69.00
resistance. The buyers will want to see the price breaking higher to position
for a rally into the 71.67 resistance, while the sellers will look for a break
lower to increase the bearish bets into new lows. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US Small Business Optimism Index. Tomorrow, we get the US
CPI report. On Thursday, we have the latest US Jobless Claims figures and the
US PPI data. On Friday, we conclude the week with the University of Michigan
Consumer Sentiment report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

As a reminder, the debate will take place later in the day at 9pm EDT (or 0100 GMT the next day). I shared some thoughts previously in this post here: Just a week to go until the next US presidential debate

As with these things, it often comes down to how things are said rather than what is said on the stage. One only has to look to the previous debate involving Biden and Trump to understand that. Biden pretty much defeated himself and it was a walk in the park for Trump. And that paved the way for Harris to step up to the plate now.

Will Harris be able to appear presidential enough while shooting down Trump’s tirade of personal attacks? Will she have the wits about her to launch her own offensive against Trump? Or will we see Trump bully his way to another debate „victory“? And what about each of their own economic promises and vision? How much of the debate will focus on that this time around?

Those will be things to keep an eye out for, even if they might not directly impact the market outlook – at least for now.

This article was written by Justin Low at www.forexlive.com.

• NHC says disturbance expected to become a tropical storm later today, risk of life-threatening storm surge and hurricane-force winds along the Louisiana and upper Texas coasts by mid-week.
• NHC says risk of life-threatening storm surge and hurricane-force winds along the Louisiana and upper Texas coasts by mid-week.

This article was written by Arno V Venter at www.forexlive.com.

• Dutch Economic Affairs Ministry will have to study Draghi report.
• Dutch Economic Affairs Ministry says extra public investments should not be an end in itself.
• Dutch Economic Affairs Ministry says agrees with Draghi on reducing regulatory burden.

This article was written by Arno V Venter at www.forexlive.com.

• China’s Xi urges stronger ties and fair business environment with Spain
• German Finance Minister backs Draghi’s growth focus but not joint EU borrowing
• Sentiment continues to improve through the session
• Draghi urges EU to boost spending by €750B and calls for joint debt issuance
• China seeks public input on carbon trading plan for cement steel and aluminium sectors
• NHC warns of potential surge and hurricane winds to Louisiana and Texas
• China to issue up to €2 bln in euro sovereign bonds in Paris on Sept 23
• What’s priced into money markets for upcoming September central bank decisions
• EU Sentix Index -15.4 vs -12.5 expected
• Greece plans €8-10 bln bond issue in 2025 aims for early bailout repayments
• China August passenger car sales down 1.1% y/y to 1.92 mln CPCA reports
• Swiss sight deposits dip slightly to 447.258 bln SFR in latest week
• Russian forces target energy facilities in 7 regions Ukraine’s Energy Ministry reports
• Japan backs ex-FX diplomat Masato Kanda for next ADB President
• Weekly update on interest rate expectations
• Russian military to participate in China’s sea and air drills in Japan and Okhotsk seas
• Market Outlook for the Week of 9th – 13th September
• Price action attempting a bit of a recovery from Friday’s moves
• What are the main events for today?
• Swedish Housing Prices 47% vs 43% prior
• Japan’s Takaichi says inflation is still weak when excluding external factors
• Today’s FX option expiry levels for the NY cut
• NHC warns of life-threatening storm surge and hurricane winds for Louisiana and Texas
• Japan’s Takaichi says strategic fiscal spending to boost jobs income and tax revenue
• Japan economy watchers poll 49.0 vs 47.5 prior
• German intelligence warns of Russian GRU cyber group targeting NATO and EU nations
• BofA forecasts Fed to start 25bps cuts from September 2024 and slowing in 2025
• Trafigura hints at possible $60 oil
• Russia’s coal exports to China drop 8% in H1 2024, rebound expected in 2025
• Goldman Sachs: OPEC to implement moderate production hikes in coming quarters
• What’s on the calendar for today?
• S&P Global expects OPEC+ to begin oil output increases in 2025

Markets:

• CAD leads, JPY lags on the day
• European equities higher;
  S&P 500 futures up 0.79%
• US 10-year yields up 2 bps to
  3.754%
• Gold flat at $2,497
• WTI
  crude up 0.93% to $68.29
• Bitcoin
  up 0.79% to $55,306

It’s been a
quiet session with no notable news release. The mood in the markets has been
positive but we will need to see how that evolves after the US cash equity
open. The US Dollar extended the gains following the better than feared NFP report on Friday.

Unfortunately,
this week is pretty bare on the data front as we head into the FOMC decision
next week. The market still sees a 25% chance of a 50 bps cut at the upcoming
meeting and a soft US CPI report on Wednesday might increase those
probabilities a little.

The focus
remains on the growth and labour market data though. For the growth data, we
have the US NFIB Small Business Optimism Index tomorrow and the University of
Michigan Consumer Sentiment on Friday. For the labour market data, we get the
latest US Jobless Claims on Thursday.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

This article was written by Arno V Venter at www.forexlive.com.

• China’s Xi meets with Spanish Prime Minister in Beijing – Chinese state media.
• China’s President Xi, in talks with Prime Minister of Spain: China and Spain should build long-term and stable relationship full of strategic determination, and push bilateral relations to a higher level – state media.
• China’s President Xi: Hopes Spain will continue to pay interest to Chinese enterprises, invest and develop businesses, and provide a fair, safe, and non-discriminatory business environment – state media.
• China’s President Xi: Hopes Spain will continue to play a constructive role in diplomatic relations between China and the EU – state media.
• China’s President Xi: China is willing to expand cooperation with Spain, strengthen communication and cooperation in international organizations such as the G20 – state media.

This article was written by Arno V Venter at www.forexlive.com.

• Monday: China CPI.
• Tuesday: UK Labour Market report, US NFIB Business
  Optimism Index.
• Wednesday: UK GDP, US CPI.
• Thursday: Japan PPI, ECB Policy Decision, US PPI, US
  Jobless Claims.
• Friday: New Zealand Manufacturing PMI, US University of
  Michigan Consumer Sentiment.

Monday

The Chinese CPI
Y/Y is expected at 0.7% vs. 0.5% prior, while the M/M measure is seen at 0.5%
vs. 0.5% prior. Real rates in China continue to be too high when there’s a
strong need for very low and even negative rates in such economic
circumstances. Chinese officials keep pledging more support but overall they’ve
been pretty slow in doing so.

Tuesday

The UK Labour
Market report is expected to show 114K jobs added in the three months to July
vs. 97K in June, and the Unemployment Rate to tick lower to 4.1% vs. 4.2% prior.
The Average Earnings including Bonus is expected at 4.1% vs. 4.5% prior, while
the Average Earnings excluding Bonus is seen at 5.1% vs. 5.4% prior. The market
sees an 83% probability of no change at the upcoming BoE meeting, and a total
of 43 bps of easing by year-end.

The US NFIB Small
Business Optimism Index is expected at 93.6 vs. 93.7 prior. It’s a pretty empty
week on the data front and the market is very focused on growth, so this
release might be market moving. As a reminder, the NFIB index recently broke out from the range it’s been stuck since 2022 and jumped to a new cycle high at 93.6.

Wednesday

The US CPI Y/Y is
expected at 2.6% vs. 2.9% prior, while the M/M measure is seen at 0.2% vs. 0.2%
prior. The Core CPI Y/Y is expected at 3.2% vs. 3.2% prior, while the M/M
figure is seen at 0.2% vs. 0.2% prior.

The Fed is now
focused on the labour market, and they’ve even stated that upside surprises in
inflation won’t change their overall outlook. Therefore, inflation reports have
less significance at the moment although I’d say that a soft report will likely
push the expectations for a 50 bps cut back around 50% as the it would give the
Fed a stronger excuse to deliver a 50 bps insurance cut.

Thursday

The ECB is
expected to cut by 25 bps and bring the policy rate to 3.50%. This rate cut has
been strongly telegraphed since July. The market expects the central bank to
cut by 25 bps at each subsequent meeting until June 2025. Although President
Lagarde might not explicitly pre-commit to a back-to-back cut in October, it’s
likely that she will keep such an option on the table „depending on the data“.

The US Jobless
Claims continues to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims
have been on a sustained rise (although they’ve improved recently) showing that
layoffs are not accelerating and remain at low levels while hiring is more
subdued.

This week Initial
Claims are expected at 230K vs. 227K prior, while Continuing Claims are seen at
1850K vs. 1838K prior.

Friday

The University of
Michigan Consumer Sentiment is expected at 68.0 vs. 67.9 prior. This indicator becomes
more important at turning points in the business cycle, so it will be something
the market will keep an eye on given the current focus on growth.

This article was written by Giuseppe Dellamotta at www.forexlive.com.