Outlook for the Week of September 8 – 12

The week of September 8–12 will be pivotal for global markets, with U.S. CPI and PPI reports in focus ahead of the Federal Reserve’s September meeting, where a 25-basis-point cut is widely expected, though a larger move remains possible. In Europe, the ECB is set to hold rates and may signal an extended pause, while France’s budget vote could inject political uncertainty. Meanwhile, OPEC’s output decision and fresh economic data from China will shape early sentiment, and bond markets face added pressure from U.S. Treasury auctions. With inflation, policy decisions, and fiscal risks in play, the week could bring significant market shifts across regions.

Key Points to Watch

• U.S. CPI and PPI data ahead of the Fed’s decision
• ECB expected to hold rates, possibly signaling an extended pause
• OPEC meeting and Chinese data likely to set the early tone
  Bond markets awaiting Treasury auctions and France’s budget vote
  

U.S. Inflation Data in Focus Ahead of September FOMC Meeting

The Federal Reserve is almost certain to cut rates by 25 basis points at its September meeting, though uncertainty remains over the pace of easing. Some analysts even speculate about the possibility of a 50-basis-point cut on September 17. At Jackson Hole, Chair Jerome Powell noted that risks to employment may now outweigh inflation risks, hinting at a possible policy shift.

The challenge lies in assessing the true extent of labor market weakness and the impact of tariffs on consumer prices. Employment and inflation data will therefore be critical in shaping the Fed’s outlook. This week’s Producer Price Index (Wednesday, September 10) and Consumer Price Index (Thursday, September 11) will be closely watched. While they may not directly dictate the immediate decision, they will strongly influence the Fed’s updated dot plot.

Since PPI is more forward-looking, a higher-than-expected reading could temper expectations of aggressive cuts. Services inflation remains the main concern, with the Cleveland Fed estimating August headline CPI at 2.8% year-on-year and core CPI at 3.1%. Friday’s University of Michigan consumer confidence survey will also be closely followed, especially as inflation expectations have recently rebounded.

If inflation data undershoot forecasts, the U.S. yield curve could steepen further, with short-term yields falling on rate cut bets while long-term yields rise on inflation fears. This comes alongside concerns about widening global deficits, with upcoming auctions of 3-, 10-, and 30-year Treasuries likely to inject further volatility.

ECB Expected to Keep Rates Unchanged

The European Central Bank is expected to leave its deposit rate unchanged at 2.0% on Thursday, September 11. With inflation near target and trade tensions easing, policymakers have scope to maintain a cautious stance. However, divisions remain within the Governing Council—some warn that further hikes may still be necessary, while others see risks of disinflation.

President Christine Lagarde is likely to strike a neutral tone at her press conference, but any hint that rates will remain steady through year-end could be seen as moderately hawkish. She will also face questions about rising eurozone bond yields, particularly given political uncertainty in France and debt concerns in advanced economies.

France Faces Budget Vote and Political Risks

On Monday, September 8, French lawmakers will vote on Prime Minister François Bayrou’s 2026 budget, which proposes $44 billion in spending cuts. A rejection could trigger early elections, raising fears of weakened fiscal discipline. France’s 10-year yield spread over German bonds has already surpassed that of Spain and Greece and is approaching Italy’s, underscoring market unease. Any new political crisis could accelerate this trend and weigh heavily on the euro.

UK Fiscal Pressures Keep Pound Volatile

The UK government will present its autumn budget on November 26, later than usual, reflecting the Chancellor’s struggle to address a potential £50 billion fiscal deficit. Markets expect revenue-raising measures rather than major spending cuts, fueling concerns over growth.

Sterling has been volatile, with government bond markets hitting multi-decade lows last week. While easing pressure in bonds may provide temporary relief, debt sustainability remains in focus. July GDP figures, due Friday, could set a fresh direction for sterling.

Conclusion

Oil markets remain volatile, driven by geopolitical risks and supply dynamics. While sanctions on Russian exports have supported prices, OPEC+ has signaled a willingness to increase production, with members meeting Sunday to finalize new quotas.

After adding 2.5 million barrels per day to supply this year, producers had suggested September’s increase could be the last. However, an additional rise in October would signal an attempt to pressure non-OPEC+ competitors and could drive prices lower if markets interpret it as oversupply.

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