The upcoming week will focus on the European Central Bank’s (ECB) monetary policy announcement and U.S. inflation data. **Monday:** No major economic events. **Tuesday:** Australia will release consumer sentiment and business confidence surveys, and SNB Chairman Schlegel will speak at a summit in Basel. **Wednesday:** The attention shifts to the U.S. with the Producer Price Index (PPI) release. **Thursday:** The ECB will announce its policy and the U.S. will report inflation data along with unemployment claims. **Friday:** The UK will release GDP figures, while U.S. markets will observe consumer sentiment and inflation expectations.

Australia’s Economic Outlook

Last month, Australia’s consumer sentiment index increased by 5.7% to 98.5, likely due to the Reserve Bank of Australia’s (RBA) rate cut. The ECB is expected to maintain rates at 2.00% since eurozone growth is low and GDP expansion is minimal. Markets will closely watch for future policy indications and projections, with expectations of a possible rate cut in December. In the United States, the core Consumer Price Index (CPI) is projected to be at 0.3% month-over-month, in line with previous results. While tariffs may pressure goods prices, service costs seem stable. The upcoming CPI report will be critical, as it is the last major data release before the Federal Reserve’s meeting, with many anticipating a rate cut due to a slowdown in economic activity. The UK is expected to show stagnating GDP, with mixed consumption and services leading growth. A weak GDP report is unlikely to change the Bank of England’s anticipated rate cut in November. The University of Michigan’s consumer sentiment survey will be important, as low confidence continues amid tariff pressures and a strained U.S. fiscal backdrop.

2019 Market Context

Reflecting on market trends from around 2019, we recall a time when central banks started lowering rates due to slowing global growth. Then, the focus was on how much the U.S. Federal Reserve and the European Central Bank would cut rates amidst moderate inflation and trade issues. This historical context is helpful as we consider the economic landscape in late 2025. One key takeaway from 2019 was the Fed’s willingness to cut rates even when core inflation was near 3%. Looking at recent data from August 2025, core PCE inflation is holding steady at 3.2%, while U.S. jobless claims have risen for the third month in a row, reaching 235,000 last week. Traders should be cautious about assuming that the Fed will hold rates, as history indicates a weakening labor market can prompt a policy change even if inflation is not at target. Similarly, back in 2019, the ECB faced weak growth, with Q2 GDP growing only 0.1%. Today, the Eurozone’s Q2 2025 GDP is also slow, at just 0.2%, hindered by weaknesses in manufacturing. With inflation in the Eurozone cooling to 2.5% in August 2025, options markets may be underestimating the likelihood of an ECB rate cut before the Fed acts, creating opportunities for divergence trades. In the UK, the familiar challenge of sluggish growth and persistent services inflation continues. Services inflation was 5% in 2019, while recent data from August 2025 shows it at 4.6%. This complicates the Bank of England’s efforts. As such, we might see continued volatility in short-sterling interest rate futures as weak growth data conflicts with the central bank’s goal of controlling ongoing price pressures. Previously, analysis showed that consumer sentiment was negatively affected by tariffs and job insecurity. Today, the University of Michigan survey for August 2025 shows low sentiment, with high borrowing costs and global supply chain uncertainties as the main causes. This ongoing consumer weakness suggests that traders might want to hedge against risks in retail and housing-related stocks, as household sectors continue to be vulnerable in the economy. Create your live VT Markets account and start trading now.

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