macro week ahead

U.S. CPI Inflation, ECB Interest Rate Decision: Macro Week Ahead

By:Ilya Spivak

Stocks may fall for a second week as cooling U.S. economic data and a defensive ECB feed global recession fears

  • U.S. CPI inflation data might spook stocks, despite a Fed policy standstill.
  • The Euro could fall if the ECB cools expectations of another interest rate hike this year.
  • Retail sales, consumer confidence data may show U.S. consumers under pressure.

Stocks fell last week, with rising crude oil prices appearing to spook investors into thinking that costlier energy will make for stickier inflation and higher-for-longer interest rates. Bond yields rose and prices fell across global markets. The US dollar joined the rally, while non-interest-bearing gold declined.

Here are the key macro waypoints likely to drive price action in the week ahead:

U.S. consumer price index (CPI) inflation

U.S. inflation is expected to have quickened in August, with the consumer price index (CPI) benchmark rising to 3.6% year-on-year. However, stripping out volatile food and energy prices is projected to produce a core rate of 4.3%, the lowest since September 2021.

This suggests the Fed is seen making continued progress toward relieving price pressure in the service sector, the main inflationary culprit in policymakers’ crosshairs. That would endorse a priced-in policy outlook envisioning no more interest rate hikes, with cuts due to begin by June 2024.

It might also spook the markets, implying that the long-awaited economic pain meant to unstick stubborn inflation in the labor market has arrived. That portends job losses and reduced spending, a toxic mix for an economy overwhelmingly driven by consumption. Stocks may wobble while the U.S. dollar, the Japanese yen and Treasury bonds advance.

US Consumer Price Index
Data source: Bloomberg

The European Central Bank (ECB) interest rate decision

The European Central Bank (ECB) is expected to keep its target interest rate unchanged at 3.75% this month. Still, the markets assign a non-negligible 40% change of a 25-basis-point (bps) rate hike. The likelihood of such an increase before the calendar turns to 2024 is an even more commanding 75%.

ECB President Christine Lagarde and company have clearly toned down some of the ultra-hawkish rhetoric from earlier in the year as the economy slips toward recession, but with inflation at 5.3%, the market still see more that needs to be done to put the central bank’s 2% objective within reach.

That might be starting to look needlessly aggressive for enough of the ECB Governing Council to put a lid on further rate hikes. In fact, officials may have limited agency to bring down goods-driven inflation lingering in the Eurozone. If rhetoric coming out of this week’s conclave signals a pivot toward wait-and-see mode, the euro may decline.

Eurozone market-implied policy rates
Data source: Bloomberg

U.S. retail sales and University of Michigan (UofM) consumer confidence

With CPI in the rear-view mirror, Fed-watchers will turn their attention to retail sales data as well as the consumer confidence survey from the University of Michigan (UofM). Receipts are seen rising 0.1% in August, marking the slowest increase since March. The headline sentiment index is expected to fall for a second consecutive month.

The markets are keenly focused on how much pain the Fed needs to inflict on the economy to judge that it has put inflation on a path toward the target 2%. The squeeze has been moderate at best so far. Data showing consumers are finally starting to buckle may put global recession risk in sharp relief, hurting risk appetite.

univ of michigan US consumer confidence survey
Data source: Bloomberg

Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.