EUROPEAN SESSION

In the European session, we have the ECB rate decision. The central bank is widely expected to hike by 25 bps, bringing the policy rate to 2.50%. The focus will be mainly on forward guidance and the appetite for further tightening. If you recall, “ECB sources” signalled in August that there was less appetite at the ECB for further tightening. This gives us a baseline to work with.

Looking at the market pricing, traders are expecting another rate hike in December and a total of 85 bps of tightening by the end of 2027. If the ECB sounds more hawkish, we could see some upside in the euro but the gains are unlikely to be sustained given the US CPI risk and the upcoming FOMC decision.

The central bank will also release the updated macroeconomic projections where growth is expected to be revised higher and inflation lower given the recent misses in core inflation readings.

AMERICAN SESSION

In the American session, we get the US PPI and Jobless Claims data. The US PPI Y/Y is expected at 5.3% vs 4.7% prior, while the M/M measure is seen at 0.4% vs 0.0% prior. The Core PPI Y/Y is expected at 4.6% vs 4.2% prior, while the M/M reading is seen at 0.3% vs 0.2% prior. The expected spike is of course due to higher energy prices. Although we might see decent market moves, especially on higher than expected numbers, the US CPI remains the main event.

Initial Claims are expected at 205K vs 206K prior, while Continuing Claims are seen at 1780K vs 1779K prior. The focus is solely on inflation, so the data will be ignored unless there’s a huge upside surprise that could trigger a growth scare.