EUROPEAN SESSION

In the European session, we get the Flash PMIs for the major Eurozone economies and the UK. Given the current growth concerns, disappointing PMIs could add to fears that the recent tightening in financial conditions and the elevated energy prices are starting to strangle the economy. This scenario should result in a dovish repricing further out the curve, with traders pricing in 71 bps of tightening for the ECB by the end of 2027 and 112 bps for the BoE.

Better than expected data could quell growth concerns and trigger some relief rallies, but it wouldn’t change the bigger picture as central banks will have to remain hawkish due to inflationary pressures stemming from the Middle East conflicts.

AMERICAN SESSION

In the American session, the main highlight will be the releases of the US Flash PMIs, as the Canadian Retail Sales and the final UMich consumer sentiment won’t change anything for the market. Everything said about the Eurozone and UK PMIs is valid for the US PMIs too.

The market has shifted its focus from inflation to growth as the conflicts in the Middle East, elevated energy prices, tigthening financial conditions, hawkish Fed and lower fiscal impulse on a Dems victory at the midterm elections are all bearish drivers.

Good PMIs could lead to a relief rally on easing growth concerns, but again, they won’t change the bigger picture as those negative drivers will remain unchanged.