24/09/24

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Central banks in Australia and Switzerland may take unexpected actions this week, while the U.S. economy’s sentiment gauges will offer further insights into potential market movements. The core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation, is also set to release at the end of the week, promising to create ripples in market conditions.

The Reserve Bank of Australia (RBA) could surprise observers by cutting interest rates following the Federal Reserve’s recent dovish stance. Economists generally predict the RBA will maintain its current rate of 4.35%, especially with domestic inflation at 3.5% year-on-year. However, forecasts point to a decline in inflation to approximately 2.8%. Additionally, ongoing economic struggles in China could stifle demand for Australian exports. Should the RBA opt for a rate reduction, it could have substantial implications for global markets. Conversely, if the rates remain unchanged, the Australian dollar may stabilize.

Consumer confidence indicators from the Conference Board will be closely monitored. Following a rise to 103.3 points in August, any sustained levels around this mark could lend credibility to the narrative of a soft economic landing, potentially invigorating markets. Conversely, a downturn in consumer confidence could hint at economic stress, negatively impacting equities while boosting demand for the U.S. dollar and gold. With falling gasoline prices, an optimistic reading is anticipated.

The Swiss National Bank (SNB), meeting on Thursday, might also catch markets off guard by keeping interest rates steady. Although a reduction of 25 basis points seems reasonable given global trends, the SNB’s current rate of 1.25% remains lower than that of the European Central Bank. Should the SNB decide against a cut, it may indicate confidence in the Swiss Franc’s stability. A rate cut could provoke a broader “currency war,” influencing other central banks to reassess their strategies.

Additionally, fresh jobless claims data, due for release on Thursday, will provide a crucial lens in evaluating the U.S. labor market. A slight rise in claims is expected, which could act as an early warning sign of economic deterioration. Finally, the core PCE report on Friday holds significant weight as the Federal Reserve tracks inflation metrics; slight deviations could influence equities and the currency market considerably.