The week of September 22-26 will bring important economic data from major markets, including the United States, Australia, and Japan. Key focuses include inflation data from Australia and the Bank of Japan’s core CPI. Additionally, the U.S. will release GDP figures and the core PCE price index. On Tuesday, we will look at the Eurozone and U.S. flash manufacturing and services PMIs, along with remarks from Fed Chair Powell. Wednesday features inflation figures from Australia and key data from Japan. Thursday and Friday will include significant announcements from the Swiss National Bank and various U.S. indicators.

Economic Data Highlights

In Australia, inflation is expected to rise to 2.9%, up from 2.8%, driven by higher electricity and housing prices. For Japan, the Tokyo core CPI is anticipated to increase to 2.8% year-on-year, up from 2.5%, due to rising food prices. The Bank of Japan is closely monitoring this situation. In the U.S., new home sales are expected to decline slightly to 651,000, down from 652,000. Core durable goods orders are predicted to drop by 0.2% month-on-month, after a previous increase of 1.0%. The core PCE price index is anticipated to rise by 0.2% monthly, which may lead to further Fed rate cuts. As the Federal Reserve signals two more rate cuts this year, we are particularly focused on Friday’s core PCE inflation report. A reading of 0.2% or lower would support the Fed’s strategy and likely boost risk assets. This aligns with our outlook since the Fed Funds Rate peaked at 5.50% in 2023 and the easing cycle started earlier this year. If the core PCE comes in at or below the 0.2% consensus, we expect a “risk-on” response that could lift equity indices. We should prepare to use options on the S&P 500 and Nasdaq 100, as lower inflation strengthens the case for rate cuts in October and December. However, if there’s a surprise reading of 0.3% or higher, we may see a shift, prompting the purchase of puts on major indices.

Potential Impacts on Markets

Due to the significance of this week’s data, we anticipate rising volatility. The CBOE Volatility Index (VIX) is currently around 14, a notable decrease from the highs during the banking stress of 2023. This creates an opportunity to buy straddles or strangles on indices, which could benefit from significant price swings following Friday’s announcement, no matter the direction. Outside the U.S., attention will be on Tuesday’s Eurozone PMI data to see if the summer’s economic optimism can continue. After a slow start to 2024, strong manufacturing and services data could support the euro against the dollar. Conversely, a disappointing result might reveal underlying weaknesses, possibly leading to short-term EUR/USD put options. Next, we’ll look at Australia’s inflation data on Wednesday, a crucial factor for the Australian dollar. After a surprising increase last month, another strong CPI above the expected 2.9% could delay any anticipated rate cuts from the Reserve Bank of Australia, creating a chance to trade AUD/USD strength using call options. We expect Thursday’s U.S. housing market data to confirm ongoing sluggishness, even with 30-year mortgage rates dropping to 6.26%, an 11-month low. Similarly, durable goods orders are likely to show weakness, especially outside the transportation sector. These trends support the Fed’s easing stance amid overall economic cooling observed throughout 2025. Finally, Friday’s Tokyo core CPI will provide more insight into Japanese inflation. Although the Bank of Japan is not expected to take immediate action, data approaching 3% signals a gradual shift away from years of deflation. This remains a long-term theme to watch for its potential effects on global bond yields and the yen. Create your live VT Markets account and start trading now.

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