U.S. Inflation & ECB Meeting: This Week’s Main Market Drivers

Last week (Sep 1–5) closed with a sharp U.S. hiring slowdown and softer yields, pushing the dollar lower and resetting risk sentiment. This week (Sep 7–12), all eyes are on the U.S. August PPI/CPI—key to real rates and Fed-cut odds—and the ECB meeting, where a hold with cautious guidance is widely expected. In this outlook, we break down how these catalysts could shape stocks, USD, gold, oil, and crypto in the days ahead.

  

U.S. Economic Review

The U.S. labor market showed a marked slowdown in August, reinforcing concerns about the durability of economic momentum. Employers added just 22,000 jobs, while revisions to prior months revealed layoffs in June, pulling the three-month average down to 29,000. Hiring was concentrated almost exclusively on healthcare, social assistance, and leisure and hospitality, leaving other industries largely stagnant. The unemployment rate (U-3) climbed to 4.3%, the highest in nearly four years, and the broader underemployment measure (U-6) rose to levels last seen on a sustained basis in 2018. For the first time since 2021, there are now fewer job openings than unemployed workers, pointing to a clear cooling in labor demand.

Despite the weaker hiring trend, layoffs remain contained. The July layoff rate was unchanged, and initial jobless claims have moved sideways, suggesting firms are still reluctant to cut staff given lingering labor shortages. This paints a picture of a market that is not collapsing but is increasingly fragile, leaving the Federal Reserve with more flexibility to ease policy if conditions deteriorate further.

Monetary policy expectations reflect this backdrop. Forecasts call for two additional 25-basis-point cuts by year-end, bringing the federal funds rate to 3.75% – 4.00%. Even so, policy would remain modestly restrictive as tariff-driven inflation continues to weigh on input costs. Purchasing managers in both manufacturing and services highlight tariffs as a pressing challenge. Prices-paid components of recent surveys eased slightly but still point to broad cost pressures that threaten to flow through to consumers.

Activity indicators remain uneven. The manufacturing sector contracted for a sixth straight month, underscoring persistent weakness, while the services sector rose to a six-month high. However, much of the August improvement in services appears to reflect demand being pulled forward ahead of tariff hikes, raising questions about sustainability.

The Federal Reserve’s Beige Book echoed these themes, noting little overall change in economic activity, weaker consumer spending in some regions, and firms turning to promotions, supply chain shifts, and even AI adoption to manage costs. Altogether, the data reveal a labor market that is tenuous rather than collapsing, inflation still pressured by tariffs, and an economy that gives the Fed scope to ease policy—though not without caution.

U.S. Economy — The Week Ahead (Sept 7–12)

The upcoming week is packed with important data releases and policy signals that will shape market sentiment across asset classes. At the center of attention are the U.S. inflation reports and labor market updates, both of which will guide expectations for Federal Reserve policy heading into the September 16–17 FOMC meeting.

NFIB Small Business Optimism — Monday

The July NFIB index showed a modest improvement, but a sharp eight-point jump in the Uncertainty Index revealed how policy volatility is constraining decision-making. Capital-expenditure intentions remain muted by historical standards. For August, sentiment is likely to stay restrained: hiring plans should remain broadly unchanged in the face of elevated uncertainty and labor shortages, while rising tariff-related input costs continue to pressure margins and complicate pricing.

BLS Benchmark & Employment/Wages — Tuesday, Sept 9

The Bureau of Labor Statistics will publish county-level employment and wages data along with its annual payroll benchmark revision. These adjustments can significantly alter historical payroll estimates, potentially reshaping how recent labor market momentum is viewed.

Producer Price Index (PPI), Wednesday, Sept 10

The August PPI will offer an early look at inflation pressures in the production pipeline. After July’s unusually strong +0.9% m/m print, consensus expects another firm reading. A stronger outcome would reinforce concerns about sticky upstream costs, especially in tariff-sensitive sectors.

Consumer Price Index (CPI), Thursday, Sept 11

The August CPI is the headline event of the week. We expect core CPI to be +0.3% m/m (3.1% y/y) and headline CPI +0.3% m/m (2.9% y/y), with food and energy likely boosting the headline figure. While firms were able to delay price increases earlier this year by drawing down inventories, stockpiles have thinned and imports have become more expensive, suggesting renewed goods-price pressure. Services disinflation should remain slow, as real incomes are still rising and sustaining demand, though softening labor conditions will help restrain wage growth.

Jobless Claims & Real Earnings, Thursday–Friday

Initial claims, expected near 230k, will be closely watched to determine whether August’s weak payrolls report was an anomaly or part of a broader trend. The BLS’s real earnings release will provide insight into purchasing power as wage growth and inflation are combined into one measure, offering a timely signal for Q4 consumption trends.

Market Implications

A hotter-than-expected CPI/PPI would reduce expectations for aggressive Fed easing and lift yields, weighing on equities and supporting the dollar. Softer prints, or an uptick in claims, would strengthen the case for imminent rate cuts, fueling further downside in USD and supporting duration trades.

Wall Street & USD — Review and Outlook

Wall Street ended last week mixed after the disappointing August payrolls. The S&P 500 rose 0.3%, the Nasdaq gained 1.1%, while the Dow slipped 0.3%. Treasury yields fell, gold hit new highs, and the DXY dropped toward 97.5 as markets priced in deeper Fed cuts.

Looking ahead, equity valuations remain sensitive to inflation surprises, with the S&P 500 trading at ~22x forward earnings. A benign CPI could extend the “cuts coming” narrative and keep USD under pressure, while a hotter print risks a correction in risk assets. Technically, the US500 remains in an uptrend above its $6,000 pivot, with near-term support at $6,380 and deeper support at $6,135.

For the dollar, the 97 level remains the key pivot—holding it would preserve medium-term support, while a break below would open the door to a slide under 96.

Global Economic Review

In China, August PMIs showed only modest improvement despite the U.S. extending its tariff pause into November. The official manufacturing PMI stayed below the 50 thresholds at 49.4, while non-manufacturing inched up to 50.3. Private survey data painted a slightly stronger picture, with the manufacturing PMI rising to 50.5 and services to 53.0. Still, overall sentiment suggests activity will slow later this year.

In Brazil, Q2 GDP grew 0.4% q/q, modestly above expectations, with gains in services and industry. However, growth slowed sharply compared with Q1. With interest rates elevated, tariffs rising, and political uncertainty lingering, momentum is likely to remain subdued in the coming quarters.

Australia delivered a stronger-than-expected Q2 GDP report, expanding 0.6% q/q and 1.8% y/y, largely supported by household consumption and a rebound in exports. Rising disposable incomes and robust July spending indicate firmer underlying momentum, though weak investment has proved a drag. The results support expectations that the RBA will hold rates in September while maintaining a gradual easing path, with additional cuts likely in November and February.

By contrast, Canada’s labor market deteriorated sharply. Employment fell by 65,500 in August, while the unemployment rate climbed to 7.1%. Combined with sluggish GDP growth, these figures strengthen the case for a Bank of Canada rate cut, potentially as early as September, depending on the outcome of the upcoming CPI release.

Meanwhile, in Japan, wage growth delivered a positive surprise. Total cash earnings rose 4.1% y/y, while ordinary-time earnings also showed firm gains. The combination of stronger labor income and persistent inflation pressures bolsters expectations for a Bank of Japan rate hike in October.

Overall, global momentum remains uneven. China and Brazil continue to face tariff and policy headwinds, while Canada shows signs of weakening. In contrast, Australia, Japan, and parts of Europe highlight areas of resilience, underscoring the patchy nature of the global recovery.

Eurozone Economic Review and Expectations

Recent data across Europe point to a gradual disinflationary trend, though with meaningful regional differences and limited scope for immediate policy easing. In the eurozone, headline CPI ticked higher to 2.1% y/y, while core inflation remained at 2.3%. Services inflation eased slightly to 3.1%, but the overall picture still signals slow-moving disinflation rather than a sharp decline. This mix is unlikely to trigger a rate cut at the European Central Bank’s September meeting.

Elsewhere, inflation signals were more varied. In Switzerland, headline CPI was subdued at 0.2% y/y, with both core and services measures easing modestly. Given this muted but stable trend, the Swiss National Bank is expected to keep its policy rate at 0% later this month. In Sweden, inflation dynamics softened: CPIF inflation came in slightly higher at 3.3% y/y, but CPIF ex-energy slowed more than expected to 2.9%. This moderation increases the likelihood that the Riksbank will lower rates by 25 bps to 1.75% at its September meeting. Taken together, these outcomes suggest Europe is on a slow path toward lower inflation, with central banks cautious about declaring victory too soon.

ECB Meeting Preview & EUR Outlook

The ECB Governing Council meets on Sept 10–11, with its decision and press conference due Thursday, Sept 11. Markets overwhelmingly expect a hold, keeping the Deposit Facility Rate at 2.00%. The growth backdrop remains mixed: Q2 GDP rose just 0.1% q/q (1.5% y/y), with activity driven largely by inventory and household spending, while business investment softened. Recent PMIs highlight fragility—manufacturing edged back into expansion (~50.7) but services slowed, leaving the composite barely above 51.0.

On the labor side, wage growth pressures are showing tentative signs of easing. The ECB’s wage tracker indicates negotiated pay growth moderating toward ~3% in 2025, a development that could help cement disinflation over time. With inflation close to target but growth subdued, policymakers are likely to stress optionality, keeping the door open for a 25-bps cut in December if conditions weaken further.

EUR Expectations

A steady, data-dependent hold would probably keep the euro range-bound, with direction dominated by U.S. inflation releases and rate differentials. A dovish hold—marked by softer projections or explicit easing bias—would tilt the euro lower, while a hawkish hold, emphasizing tariff or energy risks, could provide near-term support. Policymaker commentary so far suggests little urgency to cut, reinforcing expectations for a pause this week.

Technical View (EURUSD)

The euro is benefiting from dollar softness, testing resistance near 1.1825 on the daily chart. A sustained break above this level could open further upside potential. On the downside, initial support sits at 1.1570, with the broader range likely to hold until fresh inflation or policy signals break the stalemate.

Energy: Oil Market Conditions & Week-Ahead Outlook

Crude oil enters mid-September trading with a range-bound tone and a slight downside bias, shaped by inventory builds and cautious OPEC+ supply management. The balance of risks is finely poised, with U.S. inflation data and potential supply disruptions serving as the key swing factors for prices.

The first week of September illustrated this tug-of-war clearly. Brent began the month on firmer footing, supported by a softer U.S. dollar and concerns about potential Russian supply disruptions, closing at $68.15 on Sept 1. Yet momentum quickly faded after U.S. data showed a 2.4-million-barrel crude inventory build for the week ending Aug 29—typical of the refinery-maintenance “shoulder” season. By Sept 4, Brent had slipped to $66.95 and WTI to $63.48, the lowest Brent settlement since Aug 20. Headlines from OPEC+ added a mildly bearish note, with reports suggesting the group may consider another output increase, reinforcing the impression that producers remain comfortable easing voluntary curbs as inventories rebuilt.

The near-term U.S. backdrop has shifted from summer draws to seasonal restocking. The next EIA Weekly Petroleum Status Report (for the week ending Sept 5) is due Sept 10, one day later than usual due to Labor Day. Traders will closely monitor whether crude builds persist and whether gasoline and diesel stocks continue to climb as refinery runs ease—outcomes that would cap price rallies in the absence of fresh supply shocks.

Beyond weekly data, medium-term balances outlined in the IEA’s 2025 outlook suggest a finely balanced market, with demand normalization offset by flexible OPEC+ supply. At current inventory cover, even modest demand weakness—particularly from Europe or China—could have outsized price effects. Macro conditions matter just as much: the weak August U.S. payrolls report pushed yields and the dollar lower, providing cyclical support for commodities. But the upcoming PPI and CPI prints (Sept 10–11) could re-steepen real yields if inflation surprises to the upside, reversing part of that support. Geopolitics adds another layer of volatility, with any disruption in Black Sea or Middle East shipping capable of tightening time spreads quickly.

Key Monthly Reports to Watch

This week also brings three major oil market publications:

• EIA Short-Term Energy Outlook (Sept 9): Updated forecasts for U.S. crude output, global supply-demand balances, and Brent/WTI price paths. Key risks include demand downgrades and higher non-OPEC supply.
• IEA Oil Market Report (Sept 11): The global benchmark, with attention on demand revisions, China/India consumption, product cracks, and spare capacity. A subdued demand profile paired with resilient non-OPEC supply would tilt bearish.
• OPEC MOMR (Sept 11): Often diverges from the IEA on demand. A firm outlook and signs of stronger compliance could support a tighter Q4 narrative, while looser compliance plus solid non-OPEC growth would weigh on prices.

Price Scenarios

• Base case: Range-bound trade with a downside lean unless a bullish catalyst emerges.
• Bearish: A combination of IEA demand downgrades, stronger EIA non-OPEC supply, and higher OPEC output would soften timespreads and cap rallies.
• Bullish: Firmer call on OPEC, lower OECD stocks, and stronger product cracks, coupled with a softer U.S. CPI, would support prices by weakening the dollar and reducing real yields.

From a technical perspective, WTI looks bearish, with $60.00 as a key pivot. A decisive break below would likely open the way toward $55, while an RSI near 40 and a declining OBV both reinforce downside risks.

Gold: Market Conditions & Week-Ahead Outlook

Gold continues to be driven primarily by real interest rates, with the upcoming U.S. inflation data likely to determine near-term direction. Unless there is a decisive hawkish surprise, the balance still favors buy-the-dip behavior over any sustained reversal.

Bullion starts the week with momentum, having set fresh record highs above $3,570–3,600/oz in early September. The rally has been fueled by a softer dollar, lower Treasury yields, and rising expectations of Fed easing. Profit-taking ahead of the U.S. jobs report briefly weighed on prices, but the subsequent payrolls miss reignited demand as the DXY slid toward 97.5 and yields dropped—classic conditions for gold strength.

Macro fundamentals remain supportive. Growth is slowing, inflation is sticky but easing gradually, and monetary policy is tilting toward cuts. Markets now fully price a September rate cut, with the probability of another 25-bps reduction in October climbing above 70%. These expectations, combined with geopolitical uncertainty, are underpinning strategic allocations to gold.

Speculative positioning has also strengthened. The CFTC reported non-commercial net longs on COMEX at 249.5k contracts, up from 214.3k the previous week—an increase equal to 3.52 million ounces (~110 tonnes). Rising net longs tend to reinforce rallies, though they also raise the risk of sharper corrections if macro data surprises hawkishly.

This week’s focus will be the August PPI (Sept 10) and CPI (Sept 11). Softer prints, particularly core readings near 0.2% m/m, would extend the bid for gold. A stronger outcome would lift real yields, likely prompting a consolidation phase. Either way, the bar for a durable top remains high while Fed policy skews dovish.

Technical view: Gold is holding well above its 20-DMA near $3,450, with RSI at 77 and OBV trending higher—both consistent with ongoing bullish momentum. Overbought signals could trigger a short-term pause, but without a real-rate shock, the broader uptrend remains intact.

Crypto: BTC Conditions, Analysis & Week-Ahead Outlook

Bitcoin’s near-term direction remains firmly macro-driven. If this week’s U.S. inflation data confirms an easier policy path and a softer dollar, BTC should consolidate or grind higher. A hawkish surprise, however, would likely trigger volatility and force a reset of crowded long positions before trend buyers step back in.

BTC opens the week around $111k, just below the all-time highs set earlier this summer. July’s record near $112k and August’s rally on Fed-cut bets put $125k–$150k on technicians’ radar, though reaching those levels depends on liquidity, positioning, and overall risk sentiment.

Key drivers are clear: (1) a weaker dollar and softer real yields improving cross-asset liquidity; (2) strong institutional participation and deeper derivatives markets that magnify moves; and (3) firmer sentiment as regulatory visibility improves compared with prior cycles. The USD’s slide after weak payrolls directly tracked BTC’s push higher, underscoring how macro now dominates crypto performance.

Market structure and technical also matter. Elevated open interest and positive funding rates can amplify upside momentum but leave BTC vulnerable to sharp liquidations on negative catalysts such as a hot CPI print. Price action has respected breakout-pullback patterns, with profit-taking above $110k–$112k and quick dip-buying below—evidence of strong trend following.

Week ahead: U.S. inflation data are pivotal. Softer readings would reinforce the “cuts coming” narrative, easing conditions and favoring crypto risk. A stronger outcome would tighten financial conditions, strengthen the dollar, and weigh on BTC. Markets still price a September cut as baseline, with a small tail risk of 50 bps.

Scenarios:

• Base case: Range trade between $105k–$115k, with dips remaining buyable.
• Bull case: Softer inflation plus supportive risk tone opens a sustained break toward $125k.
• Bear case: Hot inflation or hawkish repricing sparks a pullback toward prior breakout zones.

Technical view: The recent bearish attempt stalled near $109k, but BTC remains under its 20-DMA. A sustained move above $113k would shift bias back to bullish; otherwise, upside traction may remain limited.