In the week ahead: U.S. Inflation Reports & ECB Interest Rate Decision

The euro could extend its gains against the US dollar as markets increasingly price in a Federal Reserve rate cut in September, though short-term moves remain choppy.

According to the CME FedWatch tool, traders now assign a 92% probability to a 25-basis-point Fed rate cut this month, up from 86% a week earlier, following weaker-than-expected US labor market data. Expectations for a larger, 50-basis-point cut have also gained some traction.

Friday’s US jobs report underscored those concerns. Nonfarm Payrolls rose just 22,000 in August, well below consensus estimates of 75,000 and following a revised 79,000 increase in July. The unemployment rate ticked up to 4.3%, in line with forecasts, while average hourly earnings increased 0.3% month-over-month.

Chicago Fed President Austan Goolsbee signaled caution in remarks on Friday, saying it remains uncertain whether September is the right moment to begin cutting rates. He highlighted that inflation pressures are still elevated, suggesting that some policymakers may be hesitant to move too quickly.

Meanwhile, in Europe, attention turns to Thursday’s European Central Bank meeting. The ECB is widely expected to keep interest rates unchanged for a second consecutive meeting, with steady growth and inflation near target supporting the case for policy stability.

Gold prices held close to record territory on Monday, consolidating last week’s strong rally after softer US labor market data reinforced expectations of a Federal Reserve rate cut as soon as next week. Spot prices hovered just below all-time highs, while investor sentiment remained firmly tilted in favor of bullion.

Bullion gained more than 4% last week, marking its ninth advance in ten sessions, supported by safe-haven demand tied to trade tensions, a weaker dollar, and steady central bank purchases—particularly from China, which has been steadily adding to its gold reserves.

The latest US jobs report showed slowing payroll growth and a rise in unemployment to 4.3%, fueling expectations of a 25-basis-point Fed cut at the September meeting, with a smaller probability of a larger 50-basis-point move. Traders have grown increasingly confident that policymakers will ease monetary conditions to cushion the economy from slowing growth. Lower interest rates and a softer dollar typically enhance the appeal of non-yielding assets like gold, while simultaneously making the metal more attractive to overseas buyers.

Beyond monetary policy, geopolitical risks and uncertainty over the global trade outlook continue to underpin safe-haven flows into bullion. Analysts note that persistent central bank demand, led by emerging markets, has added a structural layer of support to gold’s rally this year.

Oil prices ticked up in Asian trading on Monday, supported by expectations of tighter supplies after OPEC+ agreed to raise production at a slower pace next month.

The move helped crude recover some of last week’s sharp losses, while ongoing uncertainty surrounding the Russia-Ukraine conflict also lent support, despite limited progress on U.S.-led ceasefire efforts.

At its Sunday meeting, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to lift production in October, but by a far smaller margin than in previous months.

The group said it would add a cumulative 137,000 barrels per day (bpd) next month—well below the monthly increases of about 555,000 bpd and 411,000 bpd seen earlier this year.

The shift marks a cautious stance from the cartel, which had been steadily raising output as Saudi Arabia sought to reclaim market share following a slump in prices. OPEC+ warned it remains vigilant over signs of weakening demand, citing slower U.S. growth and sluggish momentum in China, the world’s largest importer.

Despite early Monday’s gains, both Brent and WTI futures are still nursing losses of 3–4% from last week.

Much of the downside came on Friday, after disappointing U.S. nonfarm payrolls data underscored persistent weakness in the world’s largest economy. While the weak figures fueled bets on lower interest rates and pressured the dollar, they also heightened concerns that slower growth could translate into softer fuel demand.

U.S. stock index futures edged higher on Sunday evening, as investors balanced growing expectations for Federal Reserve rate cuts against worries over a slowing labor market and broader economic weakness.

Futures steadied after Wall Street’s pullback on Friday, when disappointing U.S. jobs data bolstered bets on a September rate cut but also underscored mounting recession risks.

U.S. indexes closed lower on Friday, retreating from record highs after August nonfarm payrolls showed the economy added far fewer jobs than expected. The report highlighted the strain from President Donald Trump’s tariff policies, which took effect in August, and pushed the unemployment rate higher in line with forecasts.

The data reinforced concerns over cooling U.S. growth, but losses were capped by growing conviction that the Fed will deliver policy support. The central bank has signaled that continued labor market weakness could pave the way for more rate cuts this year.

Attention now turns to August inflation readings, with consumer price index (CPI) data due Thursday and producer price index (PPI) figures also on the calendar.

Economists expect the CPI report to reflect tariff-driven price pressures after a fresh round of Trump’s duties took effect last month. While this week’s inflation data is unlikely to alter the Fed’s September decision, it could shape the central bank’s outlook for further easing, given policymakers’ repeated warnings that tariff-related inflation risks may complicate future rate cuts.