Markets Weekly Outlook – Moving forward from NFP, onto Inflation week

[Redator]

Markets had been desperately awaiting the Non-Farm Payrolls report before making their next move. Yet even after the release, uncertainty remains.

Non-Farm Payrolls and their impact on the upcoming weeks

Markets had been waiting for today for a while. This Friday brought us the all-important Non-Farm Payrolls report for August, and the numbers were certainly a surprise.

The consequential miss—with just 22K new jobs vs 75K exp, and further downward revisions—paints a degrading picture for the labor market.

While this would have spurred an immediate risk-off reaction, stocks opened slightly higher, but the reaction quickly shifted when the US equity markets opened, and the 10:00 A.M. bell brought strong profit-taking flows.

Major US Indices are closing off their highs despite the increased rate cut bets.

The 2-year yield has plummeted to its lowest level since April's Liberation Day trough, and markets are pricing in even more cuts for the year—currently just a bit below 75 basis points. There are three meetings left for the year.

With the Fed now entering its pre-FOMC blackout period, Markets will scrutinize any tweet from Nick Timiraos from the WSJ for clues on the upcoming decision. He previously hinted at last-minute calls from the FED to redirect wrongly priced markets during the hike cycle.

While interest rate markets start to price in a 50 basis point cut, that probability remains low, hovering around 10%

The prospect of aggressive Fed cuts is holding risk appetite from a more risk-off tone across all asset classes, but metals and bonds are painting a picture of a softer economy.

Weekly performance from different asset classes

Weekly Asset Performance, September 5, 2025 – Source: TradingView

The US Dollar has been surprisingly holding strong despite the further pricing for cuts, very close to unchanged throughout the week and even after today's disappointing NFP release.

In terms of other assets, stocks and cryptocurrencies are still trading in a hesitant but upward path – Next week's open will be crucial to spot how participants envision the upcoming CPI and PPI reports. More details on this below.

The best performers of this week have largely been the Metals, with the most-traded Gold and Silver pushing to new highs, with both up 4% on the week.

As a matter of fact, Gold marked some new all-time highs ($3,600!) and is closing at its highs, a strong sign of continuation for next-week.

On the other hand, increased supply prospects are really not helping Oil which was subject to a decent rebound last week but is down 3.5% (due to continued Russia-Ukraine war and OPEC+ rising their output) throughout this weekly trading, back to its mid-month $62 support.

Read More:

• US Indices technicals as they open higher despite the miss in NFP – Cuts pricing boost stocks but sellers appear
• EUR/USD Breaks Channel as Rate Cut Bets Ramp Up… Potential 370 Pip Rally Incoming?

The Week Ahead – Moving towards Inflation week and key trade data from China

Trading has picked up again after a dull August – and as per usual, September offers intense volatility.

This phenomenon is picking up with the upcoming September 17th FOMC Meeting, which now offers at 100% pricing for a 25bps and maybe more.

Asia Pacific Markets - Trade data from China: Tariffs may now start to show in the numbers

Asia-Pacific markets head into a heavy week of data with Japan, China, and Australia all on deck which should provide a clearer picture of the impact of tariffs.

Japan kicks things off Sunday evening with a batch of Q2 GDP releases (quarterly, annualized, and the deflator) alongside the Current Account balance. Yen may find some relief from the increase US cut prospects, but that is still to see in next week's trading.

At the same time, China releases its August trade data (exports, imports, and the trade balance in both CNY and USD terms).

As a reminder, these numbers often set the tone for commodity-linked FX like the AUD and NZD.

Monday brings Australia’s Westpac Consumer Confidence print, a useful gauge of sentiment before more heavyweight Chinese data arrives.

On Tuesday, China is back in focus with CPI and PPI for August—inflation metrics that could confirm whether deflationary pressures are persisting or starting to ease.

These releases will carry weight not just for China’s policy outlook but also for regional risk appetite.

Finally, on Thursday, New Zealand drops its Business NZ PMI, an important look at whether the Kiwi economy is keeping pace with regional peers.

All told, Japan’s growth data, China’s trade and inflation prints, and Australia’s sentiment survey will dominate the conversation across Asia, while New Zealand quietly rounds out the APAC week with its own manufacturing snapshot.

US, Europe and UK Markets - US Inflation and the ECB Rate Decision

In the US, eyes are glued to August inflation prints: PPI on Wednesday and CPI on Thursday.

Both will be decisive in showing how much of the recent tariff-led inflation is flowing into prices.

Last month’s PPI spike was a wake-up call, and another upside surprise would force markets to reassess the Fed’s cutting path.

The usual Jobless Claims, U-of-Mich consumer sentiment, and the Monthly Budget Statement follow, but inflation is really the dominant theme.

In Europe, the calendar is also busy. German Industrial Production and the Eurozone Trade Balance open the week, before focus shifts to Thursday’s ECB policy decision.

Except for a major surprise, rates in Europe are for now still expected to stay put for this year (almost no cut priced in).

On Friday, the Eurozone Harmonized CPI will add another inflation datapoint just as markets parse US figures.

The UK and Canada, by contrast, are quieter. The UK has no major releases, while Canada steps back after this week’s atrocious labor report. Sterling and the loonie will likely trade off USD’s reaction to US inflation and the leftover reactions to the NFP data.

With tariffs clearly bleeding into producer prices and consumers not far behind, the upcoming week may well define whether markets are correct in the increasing pricing Fed cuts—or if the inflation story isn’t done yet.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (High-tier data only)

Safe Trades and enjoy your weekend!

Follow Elior on Twitter/X for additional Market News, Insights and Interactions @EliorManier

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