After a relatively quiet end to August, markets look set to accelerate once again as we move into September. The traditional summer slowdown is firmly behind us, and with a full slate of data releases, central bank meetings, and political developments, this month is shaping up to be a highly volatile one for currency markets.
This Week’s Highlights
Monday – Eurozone and UK Manufacturing, U.S. Closed for Labor Day
With U.S. markets shut for the Labor Day holiday, only European and UK markets will be active on Monday. Economic data will be limited, with Eurozone and UK manufacturing PMI figures in focus. Both are expected to remain unrevised, though the UK’s reading still sits below the critical 50 level, signalling contraction in the sector. Meanwhile, Eurozone unemployment is forecast steady at 6.2%.
Tuesday – Eurozone Inflation & U.S. Manufacturing
Tuesday sees the release of Eurozone flash CPI figures, with headline inflation expected to remain on target at 2% and core inflation slightly lower at 2.2%. Both readings would be seen as broadly positive for the Euro, suggesting that inflationary pressures remain manageable while leaving room for the ECB to continue its cautious path on monetary policy. Later in the day, U.S. ISM manufacturing is expected to tick up to 49. While this would be an improvement, it remains just shy of the 50 threshold, meaning the sector is still technically in contraction. This could weigh on the Dollar, especially given recent concerns over slowing U.S. growth.
Wednesday – Services PMI and Eurozone PPI
Attention shifts to services PMI data from both the UK and the Eurozone. Both readings are expected to remain above the 50 mark, signalling expansion, which will be a welcome contrast to weaker manufacturing data. However, Eurozone PPI is forecast at -0.1%, a worrying sign of ongoing weakness in producer prices, which could indicate further pressure on the industrial side of the economy.
Thursday – Eurozone Retail Sales & U.S. Employment
Thursday brings Eurozone retail sales data, offering another snapshot of consumer demand across the bloc. In the U.S., the ADP employment report will be closely watched as a precursor to Friday’s official jobs data. Expectations are for a weaker print, in line with the recent softening in the U.S. labour market.
Friday – UK Retail Sales and U.S. Non-Farm Payrolls
The week concludes with a busy Friday. UK retail sales are forecast to fall by 0.4%, though recent better weather in July could deliver a surprise to the upside. Across the Atlantic, the all-important U.S. Non-Farm Payrolls report is expected to show just 75k jobs added. A reading this low would almost guarantee a rate cut from the Federal Reserve later this month, as policymakers balance weakening labour data against the backdrop of slowing growth.
Looking Ahead: September’s Key Themes
Beyond this week, September promises plenty of catalysts for further volatility. Markets will be firmly focused on interest rate decisions from the Bank of England, the Federal Reserve, and the European Central Bank, all due this month. Each central bank faces its own unique set of challenges:
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BoE: Balancing a slowing UK economy with persistent inflationary pressures.
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Fed: Increasingly pressured to cut rates as the U.S. labour market shows signs of strain.
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ECB: Walking a fine line between supporting growth and not cutting too aggressively with inflation near target.
In addition, political risks cannot be ignored. Developments in France will likely add to Euro volatility, with investors cautious about the implications for both domestic policy and broader European stability.
Final Thoughts
September is shaping up to be one of the more important months of the year for FX markets, with central bank decisions, economic data, and political risks all colliding at once. Traders and businesses should be prepared for higher volatility and ensure their hedging and risk management strategies are in place.