Week of September 1

A relatively quiet week with risk events concentrated toward the end left markets reacting to geopolitics ahead of the release of the US PCE price index and components of Euro Area inflation.

The week ahead sees a step up in economic news events, with global PMIs, Eurozone inflation and NonFarm Payrolls among the highlights.

Week in Review

Risk events last week were balanced towards Friday, leaving markets in a holding pattern ahead of the release of US PCE. Preliminary US Q2 GDP was revised higher to 3.3% from the flash reading of 3.0%, with retail sales contributing the largest growth component. US July durable goods orders were essentially within expectations, improving to -2.8% from -9.4 in June, but still below the -2.5% that was expected.

Australian inflation surprised to the upside at 2.8%, compared to the expected 2.3%. The trimmed mean also increased to 2.7% from 2.1% the previous month. Housing costs were seen as the most significant contributor to inflation.

Japan's July consumer confidence rose to 34.9 from 33.7 and was above the 34.2 expected. Retail sales in the same period also beat expectations, growing 0.3% instead of the forecast -0.2% contraction.

In geopolitics, differences over how to deal with the French government's finances have led Prime Minister Francois Bayrou to submit his government to a no-confidence vote again. US President Donald Trump formally dismissed FOMC member Lisa Cook, who refused to step down and countersued for wrongful termination. In the Netherlands, the caretaker government of Prime Minister Dick Schoof survived a no-confidence vote amid a cabinet reshuffle.

Biggest Market Movers

• The AUDUSD surged to a 2-week high after Australian CPI rose to its highest level in a year.
• The EURUSD led decliners amid political turmoil in France and the Netherlands.
• The S&P 500 hit a new record high on Wednesday in the wake of Fed Chair Powell's dovish speech at the Jackson Hole Symposium.
• Gold prices trended higher through the week as US Treasury yields declined amid growing expectations of a rate cut at the next FOMC meeting.

Top Events in the Week Ahead

The week is set for an uneven start with the US away for the holiday while global PMI figures are released. Geopolitics could be in focus as France is set to hold a no-confidence vote in its Prime Minister, and talks to end the war in Ukraine continue, with efforts underway to set a date for Putin and Zelensky to meet.

Global PMIs and Tariff Effects

The parade of August PMI figures begins on Sunday, with the official Chinese measure for manufacturing expected to remain in contraction. Traders will be scrutinising the data for signs of economic recovery in Europe and potential price pressures resulting from tariffs. German manufacturing is expected to be confirmed at 49.9, still in contraction by the bare minimum. Meanwhile, UK manufacturing is projected to fall further into contraction amid increasing labour costs.

US NFP To Remain Weak

The main event of the week would likely be the release of the July NFP on Friday, with the consensus expecting just 50K, down from 73K a month earlier. The deterioration in the US job market is likely pushing the Fed towards easing, so underperformance in this metric would likely support the easing narrative and allow gold to move closer to record highs, potentially reaching above $3500 per ounce. The unemployment rate, however, is expected to remain unchanged at 4.2%, with improvements in the job market exerting downward pressure on the price of gold. Support below $3400 lies at $3370.

Eurozone Inflation on Target

The Flash August CPI for the Eurozone is expected to tick up to 2.1% from 2.0%, which is practically in line with the ECB's target. However, slow growth in the shared economy could sustain debate about further rate cuts, particularly if inflation were to undershoot its target. The EURUSD failed to surpass 1.1700, with a hotter-than-expected CPI reading potentially breaching 1.1745 and easing pressure, exposing the territory under 1.1600.

Other Events and Earnings

Monday has UK mortgage approvals. Swiss retail sales are expected to be released on Tuesday. On Wednesday, Australia's Q2 GDP figures are scheduled for release. Thursday has the Australian trade balance. Friday includes UK retail sales.

A relatively quiet corporate calendar sees a handful of notable names updating investors, including Salesforce, Campbell, Broadcom, Lululemon, and Copart.