Week ahead: Markets eye Powell comments, NFP for November rate cut clues

Market participants will be keeping a close watch on comments from Federal Reserve chair Jay Powell as the latest US employment figures, including the JOLTS job openings and nonfarm payrolls report, for clues about the pace and depth of interest rate cuts. German and Eurozone inflation figures ought to steer market expectations for what the European Central Bank (ECB) does next too, with latest PMI data suggesting the risks tilting towards the downside for both growth and inflation.

Here are the week’s key events:

Monday, September 30th: Jay Powell speech, Germany inflation figures

It’s too early for last week’s PBoC massive stimulus package to be reflected in business survey data, so the monthly Chinese manufacturing and services PMI data may still a reflect a bit more pessimism than it ought. Markets may disregard the China data, but they definitely won’t ignore the latest round of inflation figures from Germany.

Germany's inflation rate dropped to 1.9% in August 2024, the lowest since March 2021 and below forecasts. Energy prices fell more than 5% but services inflation remained all too sticky at +3.9% for the fourth straight month. ECB president Lagarde is due to speak later.

The big focus of the day will be on Jay Powell, who is speaking as part of a discussion titled "A View from the Federal Reserve Board" at the National Association for Business Economics. Markets will be listening attentively to anything on the Federal Reserve’s likely next move on rates.

Tuesday, October 1st: Eurozone inflation data

Following on the German inflation data traders have the main Eurozone CPI report to digest. Amid increasing signs of slowing growth and easing price pressures for businesses, this print will be a crucial one ahead of the ECB’s next policy meeting. the flash PMI for September last week showed average prices charged for goods and services in the Euro area rising at the slowest rate since February 2021. The decline pushes the PMI’s selling price index to a level below that consistent with the ECB's 2% target...in other words why wait to cut more?

Elsewhere, the ISM manufacturing PMI is the main event in the US session. The index has continued to contract and the slowdown is accelerating, with the July report slipping to 46.8 from 48.5 in June. Jolts job openings have also been in steady decline and the latest report will provide a teaser for the nonfarm payrolls at the end of the week. There will be a slew of Fed speakers to analyse the data.

Wednesday, October 2nd: UK bank stress tests

The UK is in focus early on with expected results from the Bank of England’s bank stress tests, as well as the latest FPC report. ADP private payrolls data will be watched ahead of the NFP – however imperfect a predictor of the BLS data it is. We hear from a couple more Fed speakers and the weekly US crude oil inventory report is due.

Thursday, October 3rd: ECB meeting minutes

Swiss inflation data is expected to come in flat, but with the SNB’s decision last week in the rearview mirror there will be more to come before the next meeting. ECB monetary policy meeting accounts are set to be published but may not offer much in terms of new thinking ahead of the next rate decision.

We get the final PMI surveys from the Eurozone and US, but it’s the ISM Services PMI for the US which is likely to receive the most attention. Weekly unemployment claims data is also due out.

Friday, October 4th: US nonfarm payrolls

US nonfarm payrolls data is the highlight of the week – a deeper slowdown would undoubtedly shorten the odds on the Federal Reserve opting for another 50-basis-point cut at its next meeting. Last time out, payrolls came in weaker-than-expected at 142,000, whilst the prior month was revised down to 89,000.

However, despite the evident slowdown in hiring, the unemployment rate edged lower to 4.2% whilst wage growth rose to 3.8% from 3.6% the month before. The UK construction PMI and Canada’s Ivey PMI are also due out today.

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