Table of Contents
This week, the European Central Bank (ECB) is poised to decide on interest rates, a key event for both European stock markets and the euro. On a global scale, the release of the US monthly Consumer Price Index (CPI) is also of great importance, as it will significantly influence the broad sentiment.
ADVERTISEMENTFollowing a bleak week, several key economic data releases and events are poised to shape market sentiment in the coming days.
The European Central Bank’s (ECB) rate decision will take centre stage, with the bank widely anticipated to implement its second interest rate cut of the year.
Additionally, the United States (US) is set to release August inflation figures, a crucial metric closely monitored by the Federal Reserve when determining interest rate policy.
Investors will also keep a close eye on China’s consumer price index and the UK’s GDP data for further insights into the economic outlook of both nations.
Europe
The European Central Bank (ECB) is set to hold its monetary policy meeting on 12 September. Market participants anticipate that the ECB will reduce the deposit rate by 25 basis points to 3.50%, marking the second rate cut this year.
The bank previously lowered rates in June, the first reduction since 2019, positioning itself among the first major central banks to take this step.
Markets are also forecasting an additional cut in December, potentially totalling three 25-basis-point reductions in 2024.
Inflation in the eurozone fell to 2.2% in August, down from 2.6% in July, edging closer to the ECB’s target of 2%.
At its July meeting, ECB officials suggested that September’s decision was «wide open» as the bank downgraded its growth outlook for the eurozone and observed a decline in inflationary pressures.
Investors will also be closely watching Germany’s final Consumer Price Index (CPI) data for August, which serves as a barometer for the health of Europe’s largest economy.
Preliminary data indicated that German inflation unexpectedly fell by 0.1% from July and eased to 1.9% year on year, lower than the anticipated 2.1%. Should the final data confirm this, it would provide further encouragement for the ECB’s potential rate cut.
In the UK, key data on employment, wage growth, and monthly GDP will be in focus.
Average earnings for the three months to June rose by 4.5% year on year, the lowest growth rate since February 2022, signalling some relief for inflation as slower wage growth tends to ease consumer price pressures.
However, the UK saw the highest number of new jobs in the three months to June since November 2023, suggesting the labour market may remain tight. Additionally, monthly GDP for July is expected to grow by 0.2%, further highlighting the country’s economic trajectory.
The US
The upcoming US inflation data is of critical importance to global markets, as it will heavily influence expectations regarding the Federal Reserve’s (Fed) interest rate decision this month.
ADVERTISEMENTInflation eased to 2.9% in July, down from 3% the previous month, marking the slowest increase since March 2021. Consensus estimates suggest inflation will continue to cool, reaching 2.6% in August.
If this trend holds, it could bolster the case for the Fed to reduce interest rates for the remainder of the year. Markets currently predict a 50% chance of a deeper cut, potentially by 50 basis points in September.
Another key indicator to watch is the Producer Price Index (PPI), which measures the change in the price of finished goods and services sold by producers.
In July, the PPI rose by 2.2% year on year, significantly down from 2.7% in June. A continued decline in the PPI could further strengthen the likelihood of Fed rate cuts, as it would signal easing inflationary pressures throughout the supply chain.
ADVERTISEMENTAsia Pacific
The Asia-Pacific region will closely monitor a series of Chinese economic data for August, including the Consumer Price Index (CPI), Producer Price Index (PPI), trade balance, industrial production, retail sales, and fixed asset investment.
Economic data from July revealed mixed signals, highlighting the uneven progress of the country’s recovery.
In July, China’s CPI rose by 0.5% year on year, marking six consecutive months of growth. Consensus forecasts expect this trend to continue with a 0.7% increase in August.
However, the PPI, reflecting factory gate prices, remained in negative territory, with an anticipated year-on-year decline of 1.4% last month.
ADVERTISEMENTChina’s export growth in July underperformed expectations, while imports surged more than predicted, signalling weak overseas demand.
Retail sales rose 2.7% year on year in July, slightly surpassing estimates, but industrial production showed signs of slowing.
Analysts expect both retail sales and industrial production to post declines in August, indicating that China’s economic development remains sluggish.
ADVERTISEMENT
