Multiple Central Bank Meetings in Focus

STOCK INDEX FUTURES

Stock index futures edged higher as markets kickoff the week ahead of the Federal Reserve’s policy decision on Wednesday. Weak labor market data paired with inflation readings that have shown inflation has not surged as much as initially feared have led markets to fully price in a rate with markets pricing in an 84.5% chance of an additional cut in October. Rate cuts from the Fed could provide a tailwind for stocks, particularly in the tech sector as AI enthusiasm continues to uphold market sentiment.

Nvidia’s shares slid over 2% in premarket trading after China said a preliminary probe found that the chipmaker had violated antitrust laws. The move comes as Treasury Secretary Scott Bessent meets with his Chinese counterparts in Madrid for trade talks. Elsewhere on the tech front, Tesla CEO Elon Musk announced that he would be buying $1 billion worth of Tesla shares, sending shares of the EV maker up 7% in premarket trading. Earnings season has entered its final stretch, FedEx will be the last major company to report results, as investors regard the company as a bellwether for global trade and an indicator on the US economy. On the data front, August retail sales and industrial production on Tuesday should grab market attention followed by August housing starts on Wednesday and weekly jobless claims figures Thursday.

CURRENCY FUTURES

The USD index is lower ahead of the Fed’s meeting this week where it is expected that the bank will cut rates by 25 bps. Markets have fully priced in a 25 bp rate cut and are pricing in an 84.5% chance of another cut in October. Markets will scrutinize comments from Fed Chair Jerome Powell for any signals on how fast rates could fall. Markets will also monitor whether Stephen Miran will be sworn in as a Fed governor in time for the meeting.

Euro futures are higher on a weaker dollar despite Fitch Ratings downgrading France’s credit rating, citing the government’s rising debt burden. The move had a relatively muted reaction in the markets suggesting that the downgrade was largely priced in. European exports dropped slightly in July, although exports to the US picked up. Seasonally adjusted exports from the European Union decreased by 0.4% in July compared with June. Imports fell by 2%, causing the trade balance to grow. Last week, the European Central Bank last week signaled that its rate-cutting cycle may be over. President Christine Lagarde said growth risks are now more balanced, suggesting policymakers are shifting toward a steadier stance after months of easing. On the data front, Germany’s ZEW economic sentiment data for September are due on Tuesday, while second-estimate CPI inflation for August for the eurozone is due on Wednesday. Germany publishes producer price inflation data for August on Friday, while Spain releases industrial orders figures for July. Also on Friday, France’s monthly business survey for September is due, a key insight into businesses’ well-being in light of the recent change in government.

British pound futures are higher ahead of the Bank of England’s policy meeting this week, where markets are anticipating the bank to hold policy steady due to elevated inflation. Markets will look for signals on when interest rates could fall again, with money markets only pricing in around a 36% chance of another rate cut in 2025. The BoE is also expected to make a decision on quantitative tightening and to announce a reduction in the pace of sovereign-bond sales. Attention also remains on Britain’s autumn budget announcement with Finance minister Rachel Reeves delivering her annual budget on November 26. UK public finances remain weak and markets expect that Reeves will have to raise taxes by at least 20 billion pounds ($27 billion) and possibly more to remain on course to hit fiscal targets. Jobs and wages data on Tuesday, followed by August inflation figures Wednesday, will be heavily scrutinized ahead of the BoE’s policy announcement. UK retail sales and public finances data for August are due Friday, alongside the GfK consumer confidence indicator for September.

Japanese yen futures edged higher ahead of the Bank of Japan’s policy meeting, where the bank is expected to leave rates unchanged at 0.5% on Friday. Domestic political uncertainty remains elevated after Prime Minister Shigeru Ishiba resigned, fueling speculation that a new premier could favor easier monetary policy. Economists expect that the central bank will resume rate hikes again soon as inflation remains sticky and headwinds from trade uncertainty with the US ease. Trade balance figures due Tuesday night will shed further clues on how the US-Japan trade agreement have impact exports out of the country. CPI figures due ahead of the BoJ’s policy announcement are expected to show prices having risen by 2.7% in August on an annualized basis, down from July’s 3.1%.

Australian dollar futures are higher extending gains from the previous week amid a softer greenback ahead of the highly anticipated FOMC policy decision later this week. Markets will focus on the release of August employment data due Thursday amid concerns that the labor market may be slowing despite holding strong over recent months. Government hiring has been weakening, putting more pressure on the private sector to sustain job growth. Swaps imply little chance the RBA will cut rates at its meeting this month, while a cut in November, which was priced at 100%, is now priced at just 70%.

INTEREST RATE MARKET FUTURES

Futures edged lower across the curve with yields steady. Traders are likely reluctant to take up new positions ahead of the Fed’s policy decision on Wednesday, where it is expected that the bank will cut rates by 25 bps. Investors will monitor comments from Powell to see if inflation and labor market dynamics have shifted Fed guidance looser. Yields could react sharply to any surprise in the pace or scale of policy easing. A softening labor market has supported expectations that the Fed will cut rates multiple times before year-end with markets pricing in an 84.5% chance of an additional 25 bp cut in October and a nearly 80% chance of another reduction in December.

Focus this week will also center around President Trump’s attempted firing of Governor Lisa Cook and the Senate’s move to approve his nominee. Stephen Miran, for a separate open seat. The Senate is rushing Miran’s confirmation vote at President Trump’s request so the economist can attend this week’s meeting. Miran has said that he expects to return to his position as Chair of the White House Council of Economic Advisers after his term in over on January 31, 2026, prompting markets to be skeptical of the Fed’s true independence. If Miran votes against President Trump’s wishes, it is likely he will put his job at the White House at risk.

The spread between the two- and 10-year yields rose to 51.1 bps from 50.3 on Friday.

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