Insights 
VT 
The coming week focuses on the European Central Bank’s monetary policy announcement and U.S. inflation data. Monday has no major economic events. On Tuesday, Australia will release consumer sentiment and business confidence surveys, and SNB Chairman Schlegel will speak at a summit in Basel.
Wednesday’s attention will be on the U.S. with the PPI release. Thursday features the ECB announcement and U.S. inflation data alongside unemployment claims. On Friday, the UK will publish GDP figures, and U.S. markets will watch consumer sentiment and inflation expectations.
Australia’s Economic Outlook
Last month, Australia’s consumer sentiment index rose 5.7% to 98.5, likely influenced by the RBA’s rate cut. The ECB is expected to keep rates at 2.00%, as eurozone growth remains low with minimal GDP expansion. Markets will scrutinise projections and future policy signals while expecting a rate cut in December.
In the U.S., core CPI m/m is forecasted at 0.3%, consistent with prior values. Tariff effects may pressurise goods prices; however, service costs appear stable. The upcoming CPI release is the final major data before the Fed’s meeting, with projections of a rate cut due to slowing economic activity.
The UK’s GDP is expected to stagnate, with consumption mixed and services driving growth. A weak GDP print is unlikely to alter the BoE’s expected rate cut in November. The University of Michigan consumer sentiment survey remains crucial as confidence is low amidst tariff pressures, while the U.S. fiscal backdrop remains under strain.
2019 Market Context
Looking back at market commentary from around 2019 reminds us of a period when central banks were beginning an easing cycle due to slowing global growth. The focus then was on how far the U.S. Federal Reserve and the European Central Bank would cut rates in the face of moderate inflation and trade policy risks. This historical context is valuable as we navigate the economic landscape of late 2025.
The willingness of the Fed to cut rates in 2019, despite core inflation running near 3%, is a key lesson for today. As we look at the most recent data from August 2025 showing core PCE inflation stubbornly at 3.2%, we also see U.S. jobless claims rising for the third consecutive month, reaching 235,000 last week. Derivative traders should therefore be cautious about pricing in a prolonged Fed hold, as history shows a weakening labor market can force a policy pivot even when inflation is not yet at its target.
Similarly, the ECB was grappling with weak growth back then, with Q2 GDP expanding just 0.1%. This situation is not entirely different from today, where the Eurozone’s Q2 2025 GDP came in at a sluggish 0.2%, hampered by weakness in manufacturing. With August 2025 inflation in the bloc having cooled to 2.5%, options markets may be under-pricing the probability of an ECB rate cut before the Fed acts, presenting a potential divergence trade.
In the U.K., the past challenge of stalling growth alongside sticky services inflation is a theme that has become very familiar. In 2019, services inflation was running at 5%; our latest figures for August 2025 show it remains elevated at 4.6%, complicating the Bank of England’s path. This suggests continued volatility in short-sterling interest rate futures, as weak growth data will clash with the central bank’s mandate to control persistent price pressures.
The old analysis highlighted how consumer sentiment was being hit by tariff-driven price pressures and job insecurity. Today, the latest University of Michigan survey for August 2025 also shows depressed sentiment, but the cause has shifted to high borrowing costs and ongoing global supply chain uncertainties. This persistent consumer weakness suggests that traders could use options to hedge against downside risks in retail and housing-related equities, as the household sector remains a significant economic vulnerability.
