Outlook for the Week of September 22–26

The week of September 22–26 will keep global markets on alert as investors weigh moderate Fed rhetoric and upcoming PCE data against the dollar’s fragile rebound. In the U.S., attention will turn to PMI surveys, durable goods orders, and the final GDP estimate, while ongoing trade negotiations with China and the yuan’s strength remain key drivers. In Europe, eurozone PMIs and Germany’s Ifo survey will help validate the ECB’s pause, while the SNB may signal openness to negative rates. The UK faces a test of sterling momentum with PMIs, CPI, and political risks in focus. Meanwhile, the yen is supported by BoJ hawkishness but vulnerable to political uncertainty ahead of the LDP election, and the Australian dollar awaits CPI data that could shape RBA policy expectations.

Key Points to Watch

• Moderate Fed comments and PCE data could weigh on the dollar’s rebound.
• U.S.–China trade negotiations continue, with the yuan remaining firm.
• Eurozone PMIs may reinforce the ECB’s pause; the SNB could hint at negative rates.
• The yen remains supported by BoJ policy, though political risks could cap gains.
• Australian CPI data will guide expectations for RBA policy.

Post-FOMC Period

Markets closed a volatile week dominated by central bank meetings, most notably the Fed’s. The expected 25 bps rate cut was delivered, and while the dollar briefly recovered, it remains on track for another week of losses.

Chair Powell framed the cut as risk management but the updated dot plot implied further easing, with some forecasts pointing to cuts at the final two Fed meetings of 2025. Focus now shifts to Fed speakers, particularly Waller and Bowman, whose remarks may highlight divisions after Miran’s push for a 50 bps cut. Political commentary from President Trump is also expected.

Key U.S. data includes preliminary PMIs (Sept 23), durable goods (midweek), the final Q2 GDP estimate (Sept 25), and the PCE Price Index (Sept 26). A stronger PCE reading could challenge expectations for consecutive cuts, lending short-term support to the dollar.

U.S.–China Trade Talks and Dynamics

The latest U.S.–China negotiations produced the TikTok agreement, fulfilling Trump’s demands. A scheduled Trump–Xi call is expected to confirm progress and address broader geopolitical issues. Despite yuan strength, the PBoC kept the seven-day repo rate at 1.40% and is expected to hold LPRs steady on Sept 22. While real estate pressures argue for cuts, policymakers may wait for post–Golden Week consumption data.

Eurozone PMIs and the ECB’s Pause

The ECB’s most recent meeting reinforced market expectations of a policy pause. Preliminary PMIs for services and manufacturing, due Tuesday, September 23, will provide critical validation of this stance. Germany is projected to show modest improvement despite persistent weakness in its manufacturing sector, while a stronger Ifo survey would further support signs of stabilization. In contrast, France may experience continued PMI deterioration, reflecting the impact of ongoing political instability.

The euro’s recent strength has been influenced less by domestic fundamentals and more by external U.S. factors, including political risks surrounding President Trump, concerns about the Fed’s independence, and the broader trend of global de-dollarization. Nevertheless, a corrective move remains possible, with 1.1703 identified as a key technical support level.

Sterling Momentum Tested

Sterling’s August rally against the euro is fading. Following a Bank of England meeting that left policy flexible, upcoming data and political risks will be decisive. Preliminary PMIs (Tuesday, September 23) and CPI will guide expectations, while a series of BoE speeches could prepare markets for a November cut.

Any dovish signals would pressure the pound further, undermining its recent gains against the dollar.

The Yen: Between BoJ Policy and Politics

The yen remains sensitive to political developments ahead of the October 4 LDP leadership election. Five candidates have declared, though few are expected to openly support Governor Ueda’s normalization agenda. 

The BoJ left rates unchanged last week but expressed confidence in inflation prospects, supported by the finalized U.S.–Japan trade deal. Friday’s Tokyo CPI release will be critical. While the yen has strengthened on hawkish dissent within the BoJ, more definitive signals are required to sustain a decisive dollar/yen decline.

SNB Faces Mounting Pressure Amid Weak Inflation

With CPI barely above zero, PPI sinking further into negative territory, slowing growth momentum, and the franc up 13% against the dollar, the SNB faces renewed pressure. While no immediate move is expected at Thursday’s meeting, President Schlegel is likely to keep the option of negative rates on the table—reviving memories of the 2014–2022 era. Markets may test this stance, pushing USD/CHF lower despite verbal reassurances..

Australian Dollar Outlook

The Australian dollar continues to struggle under China’s weak recovery, though domestic fundamentals remain solid. Growth and labor market data are resilient, and inflation is steady.

If this week’s PMIs and CPI (Wednesday, September 24) surprise to the upside, expectations for a September 30 rate cut could fade, providing the Australian dollar with much-needed support.

Conclusion

The week ahead will be shaped by a series of inflation and growth data releases that could recalibrate central bank expectations across major economies. U.S. PCE, eurozone PMIs, Tokyo CPI, and Australian inflation figures will be central to market direction. While policy uncertainty and political risks remain elevated, opportunities and volatility are likely to intensify across FX and global markets.

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