The coming week features key events such as US PCE data, SNB rate decision, and various inflation reports. On Monday, the PBoC is anticipated to keep Loan Prime Rates steady. Tuesday brings the Riksbank announcement with expectations for a 25bps rate cut, alongside the release of EZ/UK/US Flash PMIs.
Wednesday highlights the CNB announcement and Australian CPI data. Thursday sees the SNB and Banxico announce their rate decisions, with the former expected to hold rates at 0.0% and the latter to cut by 25bps. US Durable Goods, GDP, and PCE data will also be released on the same day.
Focus On PCE And Inflation Reports
Friday focuses on the Tokyo CPI and the US PCE for August, with analysts predicting a slight rise in core PCE. Expectations for Tokyo’s CPI follow a 2.6% annual print last month. Fed expectations are for core PCE inflation to rise between 0.28-0.35% M/M. The Fed plans to monitor inflation effects from tariffs, especially as headline PCE is projected at 2.7% Y/Y for August.
The data will shape monetary policy expectations, with markets assessing potential rate changes across global economies, while inflation metrics remain a key focus across regions.
The upcoming U.S. PCE inflation data is the week’s main event, but we believe the Federal Reserve’s focus is now shifting towards downside risks in the jobs market. Implied volatility, with the VIX index currently stable around a low 14, suggests the market is not positioned for a major surprise. This environment could be favourable for option sellers who believe the data will largely align with the Fed’s recent projections.
Regional Economic Indicators
For the Eurozone, the flash PMIs on Tuesday will provide a key check on the region’s fragile recovery. With recent Eurostat figures showing industrial production remained flat over the last quarter, a reading that is merely in line with expectations will likely keep the ECB firmly on hold. We see limited value in buying short-term call options on the EUR/USD ahead of this release, as a significant upside surprise seems unlikely.
The UK’s PMI data presents a more complex situation, with stubbornly high inflation running alongside a weakening growth outlook. Given that recent ONS data showed a surprise 0.8% drop in retail sales last month, a poor PMI figure could fuel volatility in sterling pairs. We are watching for opportunities to buy GBP puts as a hedge against a negative growth shock that could force the Bank of England into a difficult position.
There is clear event risk around the Riksbank’s decision on Tuesday, as the market is split on whether it will cut rates now or wait until November. We saw a similar period of uncertainty back in early 2024 that led to a sharp move in the Swedish krona. Traders could consider strategies like buying strangles on the EUR/SEK pair to profit from a significant move, regardless of the outcome.
In China, the central bank is expected to hold its key lending rates, but we remain focused on the underlying economic strains. Recent reports from China’s National Bureau of Statistics still show weakness in the property sector, which continues to weigh on consumer sentiment despite government support. This suggests that any rallies in Hang Seng index futures on hopes for future stimulus may be difficult to sustain.
The policy divergence between the Swiss National Bank and Banxico is set to continue this week. The SNB is almost certain to hold its rate at zero percent, reinforcing the franc’s appeal, while Banxico is expected to deliver another 25 basis point cut. This contrast in policy, which has been a theme throughout 2025, continues to support bearish strategies on the Mexican peso relative to the Swiss franc.
Finally, we will be watching inflation reports from Australia and Tokyo to gauge future central bank moves. Australian inflation has proven sticky, with core measures in the last year often surprising to the upside, meaning a hot number could sharply move interest rate futures. In Japan, another firm Tokyo CPI reading would increase pressure on the Bank of Japan, potentially leading to further selling in Japanese Government Bond futures.
