Seven major events to happen in the global market this week

Inflation is not too high, but the job market is even more worrying—it is an increasingly ngjpn.cnmon narrative about the U.S. economy. Now that the Federal Reserve is about to cut interest rates, the decision involves many variables. There are more changes in the future.

1) Will Cook participate in the Fed's vote?

After U.S. President Donald Trump announced the firing of Fed Director Lisa Cook on August 25, she filed a lawsuit in court, allowing her to remain in office during the trial. The White House appealed that a new ruling could be made before the Federal Reserve's decision.

If the court excludes Cook from the Fed, this will lead to expectations of more dovish policies in the market, which could drive gold up while putting pressure on the US dollar (USD). Investors may be upset about the weakening of central bank independence, but this concern may fade if funds become cheaper.

The market has already priced Cook can participate and vote on the next Fed decision, but anything can happen.

The court ruling may be made when the Senate approves White House economic adviser Stephen Milan as Fed director.

2) U.S. retail sales may show further consumer strength

Tuesday, 20:30 Beijing time. Never underestimate American consumers, who still insist on spending in the face of inflation, recession and all obstacles. Shoppers may tell pollers that they are not satisfied, but they are still spending.

As the world's largest economy, the United States is highly dependent on services and consumption, so this economic data is very important, although it is prone to be revised. Sales rose 0.5% in July, with the economic calendar showing AugustThe increase in portions may be more moderate. With the Fed's decision ngjpn.cning, the impact of this release on price may be short-lived.

3) The UK CPI will affect Bank of England's expectations

On Wednesday, 14:00 Beijing time. Inflation in developed countries has fallen, but in the UK, it is slower. The UK's Consumer Price Index (CPI) and core CPI both had an annual rate of 3.8% in July, and only a slight change is expected in August.

The data will affect the UK's interest rate path, released exactly the day before the Bank of England (BoE) decision.

4) The Federal Reserve's decision depends on the dot chart, Milan and Powell's concerns about unemployment

On Thursday, 02:00 Beijing time, the press conference was held at 02:30. The world's most powerful central bank is about to cut interest rates by 25 basis points, the first move this year — but it may be the beginning of a broader cycle.

The Fed has two tasks: stable prices and full employment. In the former, inflation has fallen sharply but has failed to meet the bank's 2% core personal consumption expenditure (PCE) target - its preferred potential price pressure indicator. Core PCE was 2.9% in July.

However, the rate cut is mainly due to tight job markets, which is the Fed's second task. The U.S. economy created only 22,000 new jobs in August, with an average of 29,000 new jobs in the past three months.

For the market, the question is: What will happen next? Here, there are three key factors.

1) Dot Map: First of all, the Federal Reserve's quarterly forecast, namely the "dot Map". The bond market is expected to cut interest rates in September, October and December. Will Fed officials reach a consensus around this number? If more rate cuts are added to the central bank's forecast, it could drive stocks and gold up, while the reduction would support the dollar.

2) Unemployment fear: The second factor is partly derived from the same "dot map". It also includes forecasts for unemployment. Have officials foresee a rapid or slow rise in unemployment? At the 4.3% level, unemployment does not seem to be ngjpn.cnmon, but history shows that layoffs may become an avalanche.

In addition to the "dot map", Federal Reserve Chairman Jerome Powell's ngjpn.cnments on the labor market are also crucial. A worried tone could scare the market away, even if it suggests further rate cuts.

3) Milan's choice: The third factor is the choice of the new governor. Stephen Milan is not an ordinary Trump appointee – the current president also nominated Powell during his first term.

Milan is part of Trump’s mission to win a majority in the central bank. He also told the Senate ngjpn.cnmittee that he intends to keep his job in the White House and said earlier this year that the U.S. should take action to weaken the dollar.

The lowest point on the chart, the interest rate proposed by officials, may be from Milan, which may suggest that the president wants profitsrate to reach level. He may go a step further. The new president may have different opinions and choose to cut interest rates more significantly and make a public statement. How big is the rate cut? It is hard to know, but the greater the recommended rate cut, the more significant the impact it will have on the market.

In general, the Fed's September decision will be worth remembering.

5) The Bank of England kept interest rates unchanged due to high inflation

Thursday, 19:00 Beijing time. The Bank of England expects to keep interest rates unchanged at 4.00% as UK inflation remains stubbornly high. In contrast to the Fed, London-based institutions have no employment tasks.

But similar to its American counterparts, there are also different voices within the Bank of England. Last time, the bank's Monetary Policy ngjpn.cnmittee (MPC) almost failed to reach a decision to reduce the cost of borrowing and needed a second round of votes to support the rate cut with a 5:4 majority.

This time, economists are expected to vote widely to keep borrowing costs unchanged. Any significant contrast with the Fed will trigger a drastic volatility in the pound/dollar.

6) The U.S. unemployment data has attracted much attention due to a sharp jump

On Thursday, 20:30 Beijing time. What is the situation in the U.S. labor market? The number of people who requested jobless claims each week may provide some answers, especially given the Federal Reserve's concern about unemployment.

In addition, last week's figure was unusually high, reaching 263K - the highest level since October 2021. Is this an incidental event related to the Texas reporting problem? Economic calendar displays may decline. Another figure above 250K will further intensify speculation that interest rate cuts are being cut.

Another note: Unemployment benefits application data are related to the week ending September 12 - a non-farm employment survey was conducted in the same week.

7) The Bank of Japan may try to send a hawkish signal

Friday, during the Asian time period. The Bank of Japan (BoJ) raises interest rates while other central banks cut interest rates. In addition to rising costs of other ngjpn.cnmodities, the rise in rice prices has also attracted public attention. Japan is more familiar with deflation than inflation.

However, the last time the Bank of Japan raised interest rates was in January, and the next time seemed out of reach. President Kazuo Ueda and his colleagues may continue to verbally support the rate hike, perhaps at the last meeting in 2025, but that seems farther away than ever. Even under the influence of hawkish rhetoric, the Japanese Yen (JPY) may weaken.

The Fed's decision is at a turning point in the U.S. and global economy, with various turmoil in the background: tariffs, the emergence of artificial intelligence and geopolitical storms. This can cause multiple fluctuations in the market, so please trade with caution.

The above content is all about "[XM Foreign Exchange Market Analysis]: Seven Major Things to Happen in the Global Market This Week". It was carefully ngjpn.cnpiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!

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