Markets gear up ahead of Labour week

Key Points

⚡️ Last US NFP report before Fed’s decision

⚡️ Stocks & indexes rise as investor brace for rate cuts

⚡️ Bank of Canada to cut rates, Crazy-high CPI in Poland & Asian PMI

Good Morning!

Today, we talk about rate cuts, Labour data & indexes.

But first, here’s a sneak-peak of what the markets look like this morning.

It’s been a rough month.

Some will say “Usual summer volatility” but to a lot of us, it’s more “same same but different”.

Between a disastrous NFP report in July and a massive risk off earlier this month, with a sprinkle of Japan rate hike and carry trade turmoil, it’s been somewhat of a rollercoaster.

But the story (or summer) ends well, as the prospect of the Fed cutting interest rates later this month helped stocks & indexes get back on their feet with even the Dow reaching an ATH!

The employment report to be released on Friday is much expected to help US policymakers decide what to do after the already priced-in 25 basis points cut in a little less than 2 weeks.

Indeed, any sign of a weaker labor market could revive the recession anxiety among all players and darken the economic outlook eclipsing any excitement brought by lower cost of capital.

In the same vein, looking at oil, rate cuts usually support economic growth, thus increasing demand for oil, however, this is overshadowed by fear of OPEC+ increasing global supply as early as next month, creating a state of overproduction, harming oil prices.

FX Corner

USD 🇺🇸 

Employment data will be the most awaited release of the week. After the terrible July NFP report that showed only 114K job creations in June, this week’s report will give hints on the already priced in rate cut on Sept. 18th.

Earlier this week, well have a look at Manufacturing and Non-Manufacturing PMI’s giving an estimate of world’s biggest economy’s strength.

EUR 🇪🇺 

Inflation being at a three-year low, the prospect of a European rate cut on September 12th looms large as the blackout period starts on Wednesday.

The data calendar in Euro-zone is relatively light this week, only the EU GDP & German industrial production data to be released mid-week.

GBP 🇬🇧 

We’ll like see a quiet week in the UK as well, with only PMI’s on Monday and Wednesday. Relatively strong economic data recently propelled the GBP to take back the turf it conceded right after BOE’s rates cut.

Rest of the world 🌎️ 

🇨🇳 China’s activity continues to show weakness this summer as factory prices & orders decreased. Manufacturing PMI release on Monday is expected to show a bounce back to growth territory.

Policymakers are also believed to be wanting to switch from betting on infrastructure projects to supporting the struggling economy & stimulating households consumption.

🇨🇦 On Wednesday in Canada, BoC is expected to cut rates for the 3rd time in a row. Governor Tiff Macklem hinted that their focus shifted towards boosting the economy, at the expense of combatting inflation.

🇵🇱 Also Wednesday, Poland is expected to keep rates exactly where they are considering CPI data showed this year’s highest inflation in August at 4.3% yoy.

🇨🇭 Consumer-price data in Switzerland should draw some attention in advance of the Swiss National Bank’s rate decision later this month. Market expects another rate cut as inflation sits well below the 2% target.

That’s a wrap!

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See you next time 🤙