The week of 22nd-26th September will feature several important economic data releases from key markets, including the United States, Australia, and Japan. The focus will be on inflation data from Australia and the Bank of Japan’s core CPI, while the U.S. will release GDP figures and the core PCE price index.
On Tuesday, attention will be on the Eurozone and U.S. flash manufacturing and services PMIs, with remarks expected from Fed Chair Powell. Wednesday will see Australia’s inflation figures and Japan’s key inflation data. Thursday and Friday will host important announcements from the Swiss National Bank and a robust lineup of U.S. indicators.
Economic Data Highlights
Inflation in Australia is anticipated at 2.9%, up from 2.8%, with electricity and housing prices contributing to the rise. Japan’s Tokyo core CPI is expected to show a rise to 2.8% year-on-year, up from 2.5% previously. This will include factors such as rising food prices, while the Bank of Japan monitors the situation closely.
In the U.S., expectations for new home sales are 651,000, slightly down from 652,000. Core durable goods orders are anticipated to decrease by 0.2% month-on-month, following a prior increase of 1.0%. The consensus for the core PCE price index is a monthly rise of 0.2%, which could prompt further Fed rate cuts.
With the Federal Reserve signaling two more rate cuts this year, our focus is squarely on Friday’s core PCE inflation report. We are positioned for a dovish outcome, as a reading of 0.2% or lower would validate the Fed’s path and likely boost risk assets. This reinforces the view we’ve held since the Fed Funds Rate peaked at 5.50% in 2023 and the easing cycle began earlier this year.
A core PCE print at or below the 0.2% consensus should trigger a “risk-on” response, sending equity indices higher. We should be ready to use options on the S&P 500 and Nasdaq 100 to play this, as lower inflation solidifies the case for rate cuts in October and December. Conversely, a surprise reading of 0.3% or higher would challenge this narrative and could be played by purchasing puts on major indices.
Potential Impacts on Markets
Given the importance of this week’s data, volatility is expected to rise from its current low levels. The CBOE Volatility Index (VIX) has been hovering near 14, a significant drop from the highs we saw during the banking stress of 2023. This makes buying straddles or strangles on indices an attractive way to trade a potential large price swing after Friday’s announcement, regardless of the direction.
Outside of the US, we will be watching Tuesday’s eurozone PMI data closely to see if the economic optimism from summer can be sustained. After a sluggish performance for much of 2024, strong manufacturing and services data would support the euro against the dollar. A disappointing result, however, would confirm underlying weakness and could be a catalyst for short-term EUR/USD put options.
Attention then shifts to Australia’s inflation data on Wednesday, which is a key driver for the Australian dollar. After an upside surprise last month, another strong CPI reading above the expected 2.9% could push back expectations for any rate cuts from the Reserve Bank of Australia. This would create an opportunity to trade AUD/USD strength through call options.
The US housing market data on Thursday is likely to confirm continued sluggishness, even with 30-year mortgage rates falling to an 11-month low of 6.26%. Similarly, durable goods orders are expected to show weakness outside of the volatile transportation sector. These data points serve as a backdrop that supports the Fed’s easing bias, confirming the broader economic cooling we’ve observed throughout 2025.
Finally, Friday’s Tokyo core CPI will give us another read on Japanese inflation. While the Bank of Japan is not expected to act immediately, a figure moving closer to 3% continues the slow trend away from decades of deflation. This remains a long-term theme we are monitoring for its eventual impact on global bond yields and the yen.
