In the European session, the main highlight is going to be the Eurozone Flash CPI report. The headline number Y/Y is expected at 2.0% vs. 2.0% prior, while the Core measure is seen at 2.2% vs. 2.3% prior. The ECB is highly likely to have already ended the rate cut cycle and the next move could even be a rate hike as ECB’s Schnabel mentioned today.
The market is pricing just 6 bps of easing by year-end and 15 bps by the end of 2026. So, we will need significant reasons to price in more rate cuts. Today’s inflation report might not influence expectations much unless we get notable deviations.
In the American session, the focus will switch to the US ISM Manufacturing PMI. The latest S&P Global US PMIs were very hot and the commentary even mentioned that the data is more in line with rate hikes than rate cuts. Economic activity continues to pick up and inflationary pressures intensify. The ISM is expected at 49.0 vs 48.0 prior.
The main event this week is of course the NFP report but the sentiment and positioning into Friday’s release will likely be shaped by the ISM and ADP data, so that’s something to be aware of.
