• SUN: OPEC+7 meeting, German State Elections (Saxony-Anhalt)
• MON: US Labor Day Market Holiday, German Industrial Production (Jul), EZ GDP Final (Q2), EZ Employment Change (Q2)
• TUE: US Midterm Primary Elections: New Hampshire, South Korean GDP (Q2), Japanese GDP (Q2), Chinese Trade Balance (Aug), German Trade Balance (Jul)
• WED: US Treasury Long-End Bond Buybacks Begin, US Midterm Primary Elections: Rhode Island, Chinese Inflation (Aug), NBP Announcement
• THU: ECB Announcement, CBRT Announcement, German Final CPI (Aug), Norwegian CPI (Aug), US PPI (Aug)
• FRI: UK GDP (Jul), CBR Announcement, US CPI (Aug), US University of Michigan Survey Prelim (Sep)

WEEK AHEAD

OPEC+ MEETING (SUN): The OPEC+ JMMC and OPEC-7 meetings will take place this weekend. Sources suggested no changes to October output targets as the group focuses on market conditions and compliance. The seven producers completed the rollback of their 1.65mln BPD voluntary cuts with September's 188k BPD increase, shifting attention to compensation for prior overproduction and assessments of production capacity ahead of 2027 baseline negotiations. Focus will also remain on Middle East supply and shipping disruptions, alongside readiness to act.

GERMAN STATE ELECTIONS SAXONY-ANHALT (SUN): The first of three significant state elections in September. Previously, the CDU secured 40/97 seats with AfD and Die Linke next on 23 and 12 respectively. Resulting in a black-red-yellow coalition of CDU, SPD and FDP (7 seats), controlling 56/97 state seats. This time, polling has AfD clearly in the lead with 40-43% of the vote, followed by CDU, Die Linke and SPD with around 23%, 13% and 9% respectively. Note, the German system has constituents put forward two votes, the first for a candidate and the second for a party; seats are allocated only to parties that get at least 5% of the second vote. Given polling has BSW, FDP and Grune around that threshold they are ones to watch, particularly as FDP and Grune currently hold 13 seats. Given current voting intentions, it would benefit AfD if one/both of those parties do not meet the threshold; theoretically, this could be enough to give AfD an outright majority in the state - particularly if SPD comes in much weaker than the c. 9% the polls suggest. For Germany itself, an AfD majority would see a far-right party, and one deemed extremist by the intelligence apparatus, in charge of a state for the first time in the modern era, and could be a precursor for Mecklenburg-Vorpommern (note, Die Linke leads in Berlin, the other upcoming state election) and Europe more generally over the next year. However, while it will add to the pressure on the German Grand coalition nationally, it will not change the power balance or impact economic/fiscal policy.

SWEDISH CPIF (MON): CPIF is seen edging higher in August, SEB predicts. CPIF Y/Y is expected to rise to 0.8% (prev. 0.7%), while the core component is seen rising to 0.7% Y/Y (prev. 0.6%). Both metrics would remain just above the Riksbank's own forecast, although the gap would be narrower than in the July report. Given that the Riksbank drew attention to the surge in inflation during the summer months, a hawkish report will keep policymakers wary. Nonetheless, most sell-side analysts believe that the Bank will keep rates on hold for the remainder of the year.

JAPANESE GDP Q2 (TUE): Japanese Q2 GDP is expected to be revised higher to 0.4% Q/Q (prev. 0.3%) and 1.6% annualised (prev. 1.1%), largely reflecting stronger capital expenditure data. Corporate investment has remained resilient amid robust profits and demand linked to AI and data-centre infrastructure, while private consumption is expected to remain subdued amid elevated living costs.

CHINESE TRADE DATA (TUE): China's trade surplus is expected to narrow to USD 108.6bln in August (prev. USD 112.5bln), with exports expected to remain robust amid continued front-loading of shipments ahead of potential tariffs, while imports are expected to remain subdued amid weak domestic demand. Attention will be on whether export strength can be sustained and on commodity import volumes for signs of improvement in domestic activity. Weaker-than-expected exports or softer imports would reinforce concerns over China's growth outlook and calls for further policy support.

US TREASURY LONG-END BUYBACKS (WED): On August 19th, the US Treasury announced it will at least double the size of its long-end buyback operations from September 9th, covering both the 10-20yr and 20-30yr sectors. Treasury said the increase reflects its desire to provide greater liquidity support in longer-dated nominal sectors, where there has been consistently strong participation from market participants. The announcement came at a time of elevated Treasury yields, particularly at the long end, with the 30yr yield reaching levels not seen since 2007, providing a signal that Treasury is closely monitoring conditions in the long end and is willing to step in to support market functioning. Bessent himself acknowledged that part of the move was about "signalling", while more recently saying the operations are intended to "prevent a bad outcome". The first long-end buyback announcement will take place on September 9th at 11:00EDT/16:00BST, when Treasury will announce the maximum par amount it is willing to purchase alongside a list of eligible CUSIPs for the 10-20yr sector. Attention will be on the maximum purchase amount given Treasury's language that operation sizes will be "at least double" their previous level, implying a minimum USD 4bln cap versus the usual USD 2bln maximum. However, Bessent has stressed that operations could exceed USD 4bln if required. The actual buyback will take place a day later, on September 10th, with results due shortly after 14:00EDT/19:00BST, showing the amount ultimately accepted by Treasury. The next long-end announcement will take place on September 23rd in the 20-30yr sector, followed by the operation on September 24th. Reports have also suggested Treasury Secretary Bessent has a broader plan that could escalate if so-called bond vigilantes continue to push interest rates higher, with Bessent reportedly particularly concerned that continued selling of long-dated USTs could push the 10yr yield towards 5%. Measures reportedly under consideration could include temporarily halting issuance of certain long-dated maturities, such as the 20yr. Regarding the funding of buybacks, CNBC has reported that Treasury could potentially tap the near-USD 1tln Treasury General Account to finance the operations.

CHINESE INFLATION (WED): Chinese CPI is expected to rise to 0.9% Y/Y in August (prev. 0.5%), while PPI is expected to remain subdued amid continued weakness in domestic demand and factory-gate pricing pressures. The expected pickup in headline inflation is likely to be driven largely by food and energy rather than a meaningful improvement in underlying demand. Analysts will be eyeing extent of China’s deflationary pressures, with softer-than-expected inflation likely to reinforce calls for further policy support from Beijing.

ECB POLICY ANNOUNCEMENT (THU): The ECB is widely expected to hike rates by 25bps to 2.50%, according to all 65 economists surveyed by Reuters. Moreover, Reuters source reports suggested that policymakers are ready to lift rates in September. The likes of Makhlouf, Simkus, Kocher and Dolenc have explicitly pushed for hikes at the forthcoming meeting. Headline HICP in August held firmly above 3%, well beyond the ECB's 2% target. In detail, headline inflation rose 3.3% Y/Y (prev. 2.9%), while core inflation declined to 2.4% (prev. 2.5%); the services component also moderated from the prior reading. While the headline figure cements a September hike, the benign core components are evidence that second-round effects have yet to take place. This view is also shared by the Governing Council, with Nagel the latest to highlight the theme. Following the August report, Danske Bank opined that "with inflation back above 3%, a September hike looks like a done deal". Elsewhere, growth remains resilient but subdued and the labour market holds steady. Decision aside, focus will be on the updated staff projections. ING expects growth and inflation forecasts to be revised higher, albeit slightly. However, the ECB's Radev said the September projections will show higher short-term inflation and subdued growth. Traders will also keep an eye on whether the ECB decides to update its scenario analysis. While a September hike looks fairly certain, the outlook for the remainder of the year is more clouded. Some sell-side analysts believe this will be a one-and-done hike; the latest Reuters poll indicates that 91% of economists surveyed see the rate remaining on hold for the remainder of the year. However, both BNP Paribas and JP Morgan now see another hike in December, having previously expected no more hikes this year. BNP Paribas wrote: "we think the persistence of the energy shock and the resilience of the economy make second-round effects more likely to materialise". Some policymakers have been more explicit about the potential need to raise rates further; Simkus said that a hike in September "is not going to be enough", while Radev noted that both October and December are "live meetings". Ultimately, the direction rates take beyond September will be dictated by energy dynamics and their impact on inflation.

CBRT POLICY ANNOUNCEMENT (THU): The CBRT announces its next policy decision on 10th September, with the key rate set to remain at 37.00% and the interest rate corridor at 450bps. A hold is justified after the bank resumed weekly repo auctions at its 37% policy rate in August, reversing an effective rate hike to 40% implemented at the start of the Middle East conflict. Recent inflation data showed continued progress in disinflation, with inflation falling to 31.5% Y/Y in August from 31.8% in July, supporting the case for resuming cuts later this year. However, focus will be on the statement for tweaks to language on geopolitical and energy risks. Bank views remain split on timing: Morgan Stanley and JPMorgan expect a hold this week, with cuts starting in October and both seeing 35% by year-end; Bank of America sees a hold before a 100bps cut in October to 36%; ING expects a gradual move towards 35% in Q4; while HSBC is the dovish outlier, expecting the CBRT to resume cuts as soon as this meeting.

NORWEGIAN CPI (THU): Headline inflation and CPI-ATE in August are expected to cool on a M/M basis while accelerating Y/Y. In more detail, CPI-ATE is expected to fall 0.4% M/M (prev. +0.8%), while the Y/Y rate is seen rising to 3.1% (prev. 2.7%). Despite the higher Y/Y figure, it would remain below Norges Bank's own forecast of 3.3%. The data will be a key determinant heading into the September meeting, with mixed views on whether the Bank will hold rates or deliver a 25bps hike. For reference, the current guidance notes that it may still become necessary to raise the policy rate.

UK GDP (FRI): UK GDP in July is expected to print at -0.2% M/M (prev. 0.3%), while rising 0.2% Q/Q (prev. 0.4%). As a reminder, the June report was strong, with the economy benefiting from temporary factors such as warmer weather and the World Cup. However, the July report is expected to show an unwind of those factors; the latest retail sales data for July fell 0.5% (prev. +0.7%), with activity seemingly hit by the heatwave. Looking at PMIs as a proxy, the manufacturing report highlighted that output and new orders accelerated, with production rising at the fastest rate in almost two years. However, hiring came to a halt in July. The services report suggested that new work picked up, though the "rate of expansion" was "still sluggish".

US PPI (THU), CPI (FRI): PPI is expected to rise by +0.3% M/M in August (prev. 0.0%), and the core PPI is also seen rising by +0.3% M/M (prev. +0.2%). Headline CPI is expected to rise by +0.4% M/M (prev. 0.1%), and the core rate is seen rising by 0.2% M/M (prev. 0.2%). The data will be used by traders to help shape Fed rate expectations for the 16th September FOMC meeting. The influential Fed Governor Waller this week signalled support holding rates steady at the September meeting if August inflation data shows continued progress. Waller is confident in inflation falling ahead, and said he is finally seeing signs of disinflation, with three-month core inflation showing considerable improvement, though inflation still remains significantly elevated and above the Fed’s 2% target. He suggested that he would consider a rate hike if the August metrics were hot, adding that a small policy adjustment would help ensure progress resumes if it shows reversal. In terms of the drivers, Waller argued that elevated energy prices and tariffs are not significant ongoing inflation sources, and wage growth is consistent with a return to target. Traders usually use the CPI and PPI figures to determine how the Personal Consumption Expenditures index, long-considered the Fed’s preferred gauge of inflation, will look. But Waller suggested that PCE and core PCE are not best guide for where inflation actually is; he also said that underlying inflation ‘doing better’ than core numbers suggest. After Waller’s remarks, traders sharply pared back expectations for Fed rate hikes, with money markets pricing around 50% chance of a hike (vs around 70% earlier in the week).

WEEK IN REVIEW

EZ CPI PRELIM REVIEW: Headline inflation continued to edge higher in August, with the Y/Y rate rising 3.3% (prev. 2.9%), a surge that was in line with expectations. Similarly, the M/M figure rose 0.4% (prev. 0.2%). On the other hand, services inflation cooled to 3% (prev. 3.3%), while the core components also moderated to 2.1% (prev. 2.2%). Overall, the headline figure reinforces expectations that the ECB will deliver a September hike, though the benign core figure will support arguments on both sides over decisions later in the year and potentially prompt dissent in September. Policymakers will focus on second-round effects; the Governing Council has yet to see any evidence of these, but will likely acknowledge the risk that they could emerge in the future. ING expects the ECB to deliver a 25bps hike and said that as long as inflation "remains mainly energy-driven, hiking rates further beyond next week would not make a lot of sense".

US ISM MANUFACTURING PMI REVIEW: ISM Manufacturing for August fell to 54.6 from 55.6, and below the forecasted 55.2. Looking at the sub-components, Employment declined to 51.2 (exp. 52.5, prev. 52.8), while Prices was unchanged M/M at 71.1, but above the expected 70.5. New orders tumbled to 53.7 (exp. 56.8, prev. 56.7). Supplier deliveries ticked up to 59.3 from 58.9, while Inventories edged down to 50.6 from 51.2. Backlog of orders fell, but remained above 50; export orders ticked up while imports declined. In the August report, 42% of the comments were positive, and 58% were negative, with pricing volatility mentioned in 57% of negative comments, the Iran war 30%, increasing lead times 46% and tariffs 29%. Overall, the past relationship between the Manufacturing PMI and the overall economy indicates that the headline corresponds to a 2.4% increase in real GDP on an annualised basis. ING writes that another firm ISM mfg. index boosts confidence in the durability of the recovery in the sector, fuelled by the ongoing surge in tech-related capex. However, ING adds, the economy continues to create limited numbers of jobs, with wage pressures remaining remarkably benign.

RBNZ POLICY ANNOUNCEMENT REVIEW: RBNZ raised the OCR by 25bps to 2.75%, as expected for its second consecutive rate hike, with the MPC reaching a consensus on the decision. The Committee judged that gradually removing monetary stimulus is appropriate to return inflation to the 2% target midpoint while supporting growth and employment. RBNZ said the decision reduces the risk that the OCR needs to increase by more later and that future policy decisions will depend on the Committee’s judgement of the balance of risks to medium-term inflation. In terms of the projections, the OCR is seen at 2.81% in December 2026 (prev. 2.84%), 3.12% in September 2027 (prev. 3.11%), 3.15% in December 2027 (prev. 3.15%) and at 3.28% in September 2029. NZD was pressured in reaction to the announcement given that the decision was widely anticipated and the language refrained from any hawkish surprises, and with the rate projections little changed. RBNZ Governor Breman said during the post-meeting press conference that she expects economic growth to strengthen and broaden. She noted that OCR projections are relatively in line with prior forecasts and that they are moving the OCR up towards neutral and it is still accommodative.

BOC POLICY ANNOUNCEMENT REVIEW: The Bank of Canada left rates on hold at 2.25%, as expected, and acknowledged recent developments with the US/Iran conflict and fresh tariff announcements from the US and Canada. It noted that upside risks to inflation have increased, while new tariffs make growth prospects more certain - noting both developments remain fluid. The explicit mention of rising inflation risks, and commentary from Macklem stating that inflation data will guide policy decisions - adding that multiple rate increases could be needed if they felt that inflation is a problem, lead to a hawkish reaction. The governor also acknowledged that monetary policy cannot offset the effects of tariffs or influence global energy prices, but what they can do is ensure global developments don’t jeopardize price stability in Canada. Meanwhile, the statement acknowledged an improvement in labour market conditions and strengthening Canadian economic activity with solid consumption. Given these references, it appears the BoC are somewhat more concerned about the inflation side of its mandate with rising inflation risks, but it acknowledged little evidence of higher energy prices spreading to other components of inflation. Money market pricing now assigns a c. 75% probability of a rate hike vs 64% beforehand for a rate hike this year, but Oxford Economics expects the BoC to keep rates on hold until late 2027 and possibly into 2028 - citing recent escalation of US/Canada trade war. It calls market pricing of three 25bp hikes by mid-2027 overly ambitious.

AUSTRALIAN GDP REVIEW REVIEW: Australian Q2 GDP rose 0.4% Q/Q (exp. 0.3%) and 2.1% Y/Y (exp. 1.8%), although GDP per capita was flat. Household consumption rose 0.4%, supported by a sharp increase in EV purchases, while underlying consumer activity remained subdued. The stronger-than-expected headline growth, alongside elevated unit labour costs and weak productivity, heightened concerns over persistent inflationary pressures and strengthened expectations for further RBA tightening.

SWISS CPI REVIEW: Swiss inflation was hotter than expected, with headline inflation rising 0.8% Y/Y, above the expected 0.5% and prior 0.4%. M/M inflation rose 0.4%, above the consensus forecast of 0%. The upside surprise was driven by energy prices, which rose 0.6% M/M, with limited spillover into the broader basket, leaving core inflation at 0.2% M/M. One factor behind the upside surprise was the weakening franc, which softened 1% in August against the euro. Despite the hotter print, inflation remains in line with the SNB's 0.7% forecast for Q3. The data should be encouraging for the SNB after recent months of near-zero inflation. Looking ahead to the policy meeting on 24th September, the SNB is expected to leave rates on hold, with markets assigning a 100% probability of such a decision.

US ISM SERVICES PMI REVIEW: Services PMI rose to 55.4 from 54.1, above the expected 54.1. Employment rose to 47.8 from 47.4, but shy of the forecasted 48.3, while new orders jumped to 60.9 (exp. 56.0, prev. 57.2) and business activity to 61.7 from 59.1. The inflationary gauge of prices rose to 72.3 from 70.3. Supplier Deliveries dipped to 51.3 (prev. 52.8), while inventories and backlog rose to 56.7 (prev. 51.4) and 55.6 (prev. 50.9). In the respondents' survey, tariffs and the Middle East conflict returned as the most cited issues impacting respondents’ supply chains, but encouragingly there was a slight reduction in the share of companies cutting staff levels. The rise in the headline confirms that activity in the service sector remains solid, and Oxford Economics writes that lagging employment is consistent with their view that the economy is in a mostly jobless expansion. With the prices index lifting back to its highest level since August 2022, alongside the simultaneous uptick in order backlogs, it suggests that broader supply chain stress, in addition to elevated energy prices, is contributing to price pressures.

US JOBS REPORT REVIEW: The US jobs report was strong, and heightened traders' bets for a September Fed rate hike, with an implied probability of a 25bps hike now priced with 65% probability (vs 50% pre-release). The headline was strong, and saw 162k jobs added to the US economy in August, above the expected 55k and the prior revised-up 21k. The unemployment rate was unchanged at 4.1%, as expected, while the participation rate lifted to 61.6% from 61.4%; U6 unemployment rate declined to 7.7% from 7.9%. For the headline, private payrolls contributed 127k jobs (exp. 45k, prev. 71k), manufacturing 16k (exp. 5k, prev. 14k), and Government 35k (prev. -50k). Wages ticked higher by 0.3% M/M (from 0.2% prior), while the annual rate slightly cooled to 3.1% from 3.2%, but still above the consensus of 3.0%. All in all, money markets have moved more hawkish as it continues to show the labour market is in good health, and steady. As such, and although it was already the case, it places paramount importance on next week's inflation reports as they will highly likely determine what the Federal Reserve does at its 16th September confab; if inflation is hotter than the Wall St. consensus, a hike will get even more baked-in. Some of the recent comments from Fed members include the influential Waller supporting a holding policy rate steady at September FOMC meeting if August inflation data shows continued progress. In most recent remarks from Fed Chair Warsh, he said he has work to do unless underlying inflation is moving clearly towards 2% objective at sufficient speed.

CANADIAN JOBS REPORT REVIEW: Employment took an unexpected downturn in August, declining 41.7k (exp. +15k) after a strong +75.1k reading in July. A drop in full-time employment weighed on the headline, down 35.9k (exp. +38.6k), while part-time employment fell 5.8k (prev. +36.6k). That said, the unemployment rate remained at 6.4% as expected, with the participation rate ticking down to 65.0% from 65.1%. Average hourly wages eased to 2.0% from 3.0%. The soft headline, easing wage growth and continued volatility in labour figures will keep policymakers in a wait-and-see approach as they navigate a challenging labour market while remaining prepared to address further upside moves in inflation. As it stands, money markets continue to price a full 25bps rate hike by year-end. The rally in Canada 2-year yields paused after today's jobs report.