Errante's The Week Ahead: 9th - 13th September 2024

Errante’s The Week Ahead: 9th – 13th September 2024

Errante’s The Week Ahead: 9^th to 13^th September 2024

Highlights of the Week:

ECB Rate Decision: Markets are eagerly awaiting the European Central Bank’s (ECB) decision on interest rates and the Monetary Policy Statement.

US Inflation Data: Core and headline CPI will be key data points that could sway expectations for Federal Reserve policy in the coming months.

UK Employment Figures: The labor market in the UK will be in focus with the release of Claimant Count and Average Earnings Index, which could shape expectations for the BoE’s future monetary stance.

Now What?

As we head into the second week of September 2024, market participants are focusing on several major economic releases that could influence the outlook for global central banks, especially the European Central Bank (ECB) and the Federal Reserve.

ECB Outlook: The ECB faces a challenging macroeconomic environment as inflation continues to moderate, but growth remains fragile. The upcoming ECB rate decision (Thursday, September 12) will provide crucial insights into whether the central bank will continue to hike rates or hold steady. Markets are increasingly pricing in a dovish shift given recent signs of economic cooling in Germany and the broader Eurozone. However, with core inflation still elevated, the ECB may signal caution. The German CPI on Thursday will add further context to inflation trends in the bloc’s largest economy.

US Inflation Data: In the US, Core CPI and CPI (Wednesday, September 11) will be key in shaping expectations for the Fed’s next move. Given the recent deterioration in the US labor market and two consecutive Non-Farm Payrolls (NFP) misses, any significant cooling in inflation could reinforce expectations of a Federal Reserve rate cut by year-end. However, sticky inflation could delay this outcome, supporting the dollar in the short term.

Market Events and Announcements:

The times below are GMT +3.

Monday, September 9, 2024:

4:30 AM – CNY CPI y/y: A key measure of inflation in China, indicating the change in prices of goods and services year-over-year.

4:30 AM – CNY PPI y/y: Producer Price Index, showing the change in the price of goods sold by manufacturers, key for understanding inflation pressures.

Tuesday, September 10, 2024:

9:00 AM – GBP Claimant Count Change: Reflects the number of people claiming unemployment benefits in the UK.

9:00 AM – GBP Average Earnings Index 3m/y: Measures the average earnings in the UK, including bonuses, over the past three months.

3:10 PM – CAD BOC Gov Macklem Speaks: Comments from the Bank of Canada’s Governor on monetary policy and the economic outlook.

Wednesday, September 11, 2024:

9:00 AM – GBP GDP m/m: Monthly Gross Domestic Product data, a measure of the UK’s economic activity.

3:30 PM – USD Core CPI m/m: Excludes food and energy prices, a more stable measure of inflation.

3:30 PM – USD CPI y/y and m/m: Headline inflation data that will help gauge price pressures across the US.

5:30 PM – USD Crude Oil Inventories: Measures the change in the number of barrels of crude oil held by US companies.

Thursday, September 12, 2024:

3:15 PM – EUR Main Refinancing Rate: The ECB’s key interest rate decision.

3:45 PM – EUR ECB Press Conference: Provides insights into the ECB’s economic outlook and policy actions.

3:30 PM – USD Core PPI m/m and PPI m/m: Measures producer price changes, which reflect inflationary pressures.

3:30 PM – USD Unemployment Claims: Measures the number of people who filed for unemployment benefits for the first time.

Friday, September 13, 2024:

5:00 PM – USD Preliminary UoM Consumer Sentiment: A survey that reflects consumer confidence in the US economy.

5:00 PM – USD Preliminary UoM Inflation Expectations: Measures consumers’ expectations for inflation over the next 12 months.

Market Insights: Key Charts to Watch

Chart 1: US Dollar Index (DXY) on Daily Chart

The US Dollar Index (DXY) has been under significant pressure, driven by weakening US economic indicators, particularly in the labor market. Following two consecutive NFP misses, expectations are building that the Fed may opt for a more dovish stance.

Main Scenario: If the US CPI data confirms a cooling in inflation, the DXY may test the strong support at 100.410. A sustained break below this level could signal further downside towards 100.020, 99.524, and 98.976.

Alternative Scenario: Should inflation prove stickier than expected, coupled with resilient economic data, the DXY may find support and reverse higher. In this case, resistance levels to watch are 100.985 and 101.844. A break above the latter would indicate a bullish shift in sentiment.

Key Drivers:

US Inflation Data: Core and headline CPI will be critical in shaping expectations for the Federal Reserve’s next move.

Labor Market Data: With the labor market showing signs of softening, the Fed may have more room to pause or cut rates.

Chart 2: Gold on Daily Chart

Gold is poised to continue its upward trajectory after multiple tests of the all-time high at $2,528.94. The precious metal remains well-supported by geopolitical risks and expectations of further dollar weakness as the US economy slows.

Main Scenario: If the resistance at $2,528.94 breaks, gold could aim for higher targets at $2,544.47, $2,564.22, and $2,586.03. The key drivers here are continued global economic uncertainty and weakening USD sentiment.

Alternative Scenario: If sellers manage to defend the all-time high, we could see a pullback towards $2,507.13 and $2,471.85. A break below $2,471.85 would signal a reversal, with support at the 34-day moving average.

Key Drivers:

US Dollar Performance: A weaker dollar will likely support higher gold prices.

Geopolitical Tensions: Ongoing geopolitical risks could further drive safe-haven demand for gold.

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