The calendar is mostly clear today due to a US holiday. The main items on the agenda are the final PMI readings and the Eurozone unemployment rate, but these are unlikely to influence central banks or markets. ECB speakers are expected to repeat familiar messages, with no signs of immediate changes to interest rates. Right now, there is no strong reason for the ECB to adjust rates.

Impact of US Holiday on Trading

With US markets on holiday, trading might simply follow trends from last week without new energy. This week’s US labor market data will be crucial, shaping future expectations, although it may not affect the Federal Reserve’s decisions this month. With the US out for Labor Day, trading volumes are very low. This quiet period, with the VIX index near a low of 13, suggests that markets may continue last week’s trends without interruption. Keep a close eye on derivative positions, as low liquidity can lead to sudden, unexpected price changes. We do not expect significant news from ECB speakers this week, making it a bad time to bet on changes in European policy. Last week, Eurozone inflation remained steady at 2.9%, and August’s unemployment rate held at a record low of 6.3%. This gives the central bank no reason to discuss rate cuts. For now, their policy direction appears stable.

Upcoming US Labor Market Report

The key event for everyone is the US labor market report this Friday. We expect the Non-Farm Payrolls data to show about 160,000 jobs added, down from 185,000 in July. This number will greatly influence the market’s prediction for a Federal Reserve rate cut later this month. This sets up opportunities for trades that can benefit from increased volatility. We can use options on Fed Funds futures or the S&P 500 to prepare for the outcome. If the jobs number is significantly below expectations, a rate cut will become almost certain. Conversely, if the number unexpectedly exceeds 200,000, we may see quick shifts in pricing. History shows that volatility often spikes after the summer lull ends, especially in September. Create your live VT Markets account and start trading now.

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