Let’s be honest, it’s the week markets have been waiting for after the summer break, as the Fed meet to discuss interest rate policy. It so happens there are a plethora of other major central bank decisions from the Bank of Canada, Bank of England and Bank of Japan, as well as major data risk events. Stocks have been celebrating the forthcoming Fed rate cuts with ongoing fresh record highs, but this comes amid several potential headwinds which bonds markets are more concerned about.

A recommencement of a steady Fed easing cycle is expected by Wall Street, predicted as six consecutive quarter-point rate cuts which leaves the terminal rate at a trough of 3% by mid-2026. Policymakers appear to be siding with the employment side of their dual mandate, with increasing worries over the slowing labour market. We think it’s important to note that job growth is low due to workforce growth being low and not because more demand stimulus is urgently needed. But the recent soft NFP reports trump unease about inflation risk, including any tariff effects which are still expected to feed through into CPI data in the coming months. These are now deemed a one-time shift in prices, dare we say ‘transitory’, and not persistent.

This all means Powell will need to back up his recent dovish pivot at the press conference, while the updated dot plot will be watched closely as it is likely to show major changes to the June median. A shift to 75bps of cuts or more from the current 50bps in 2025 is predicted by many, and the 75bps seen next year is also likely to be bumped higher (median dot goes lower), because to leave it as is would be hawkish. That would support the dollar which has been consolidating in recent weeks just above long-term lows. It seems only a matter of time before bears regain the ascendancy.

Gold prices over the last couple of days hit another record top, with seemingly everyman and his dog bullish. That makes us slightly nervous, but a pause for breath or mild correction would be healthy. While the precious metal has already set more than 30 nominal records so far this year, the latest surge meant it has also topped the inflation adjusted peak set in 1980. Stocks face a slightly different dynamic as investor sentiment remains very low, in the seventh percentile. But the performance of the S&P 500 and Nasdaq since the April lows represents one of the best five-month rallies in history, up 36% and 50% respectively.

In Brief: major data releases of the week

Monday, 15 September 2025

– China Data: A mild recovery is expected in retail sales at 4.7%. But industrial production and fixed asset investment are seen moderating at 5.8% and 1.5%, respectively. Weather in July impacted activity and calls for more stimulus are growing.

Tuesday, 16 September 2025

– UK Jobs: There have been longstanding reliability issues with the unemployment rate, which is forecast to hold steady at 4.7%. Wage growth is predicted to tick one-tenth higher to 4.7% while some focus will be on the payrolls data after recent weakness.

– US Retail Sales: Headline sales activity is expected to rise 0.3%, down from the prior 0.5%. The ex-autos figure is also seen at 0.3%, unchanged from the July print. Muted consumer sentiment may weigh along with diverging income growth.

Wednesday, 17 September 2025

– UK CPI: Headline inflation is expected to rise one-tenth to 3.9% and core ease to 3.7%. Services could edge lower, down from 5%. CPI is forecast to peak in September.

– Bank of Canada Meeting: Markets expect a 25bps rate cut, taking the overnight rate to 2.5%. Inflation remains broadly in line with the target, but unemployment ticked up above 7% and output contracted sharply in Q2.

– FOMC Meeting: The Fed is fully expected to cut rates by 25bps, with currently around 70bps priced in total for 2025. The labour market is cooling though inflation remains elevated. Updated economic projections and a new dot plot will be published, with both the 2025 and 2026 median likely falling.

Thursday, 18 September 2025

– Australia Jobs: Consensus expects 22k jobs added in August, roughly similar to the prior 24.5k. The jobless rate is likely to remain steady at 4.2%. The labour market is seeing continued gradual softening. 

– Bank of England Meeting: The MPC will sit on its hands with a 7-2 vote split likely. Growth and job concerns are increasing but inflation remains relatively sticky. A ‘gradual and careful’ approach should continue, with new economic projections not published until November.  

Friday, 19 September 2025

– Bank of Japan Meeting: The BoJ is expected to maintain its 0.5% policy rate as it assesses the impact of the US-Japan trade deal and the fluid domestic political situation. Core inflation is predicted to stay above 3% while GDP was solid in Q2, supporting a potential rate hike in the autumn.