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This week's U.S. PCE inflation data has strengthened the prospect that the Fed's rate cut next month will be less aggressive, as consumer spending continues to unexpectedly exceed all expectations. This clearly indicates that the U.S. economy continues to maintain a good momentum, with steady and above-trend growth. The 25 basis point rate cut in September is widely seen as a done deal, and expectations for a significant rate cut have cooled.
Following the release of the PCE data, the U.S. dollar index accelerated to a more than one-week high, but still recorded its largest monthly decline in nine months in August. The two-year U.S. Treasury yield fell by over 33 basis points in August. The three major U.S. stock indexes all rose, with the Dow hitting a new all-time high again, and the S&amp;P 500 also approaching its historical high. The S&amp;P 500 rose by 2.28% in August, the Dow rose by 1.76%, and the Nasdaq rose by 0.65%.
On Friday, the simultaneous strength of the U.S. dollar and U.S. Treasury yields weighed on commodities, coupled with several representatives within the OPEC+ alliance indicating that they expect to push for increased production. As a result, U.S. oil futures closed down by over 3%, with a cumulative decline of 5.6% in August. COMEX December gold futures fell back this week, erasing the gains made earlier in the week, with a weekly decline of 0.73% and a cumulative increase of 2.2% in August. Spot gold rose by 2.28% in August. Silver futures fell by 0.42% in August, while spot silver fell by 0.49% in August.
Market focus has now shifted to the crucial August labor market data next week, with the Fed hoping that the non-farm payroll report will not increase pressure for a 50 basis point rate cut. The threshold for a 50 basis point rate cut is also high, and may require a significant shortfall in non-farm payroll growth, such as an increase of less than 100,000.
Here are the key points that the market will focus on in the new week (all times are in Beijing time):
<h2>Central Bank Dynamics:</h2>
<h3>Fed: Next week's data may determine whether the Fed will cut rates by 25 or 50 basis points in September</h3>
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Thursday 02:00, Fed releases Beige Book on economic conditions
Friday 20:45, FOMC permanent voter and New York Fed President Williams speaks
Friday 23:00, Fed Governor Waller speaks on economic outlook
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Next week, two important Fed officials will speak, and the Fed's Beige Book will reveal more details about the U.S. economic conditions. Cameron Dawson, Chief Investment Officer at Newedge Wealth, stated that investors are seeing another sign of a soft landing - inflation will fall or at least not accelerate, while personal income remains elastic and continues to grow at a healthy pace without sacrificing economic growth. If people see that economic growth remains resilient, this indicates that the Fed does not need to respond urgently, but it is also worth noting that this may indicate that the Fed has room to adjust interest rates
The current consensus is that the Federal Reserve will begin its easing cycle next month, with four interest rate cuts (25 basis points) by December.
Naeem Aslam, Chief Investment Officer of Zaye Capital Markets, commented that the Fed's plan depends on next Friday's non-farm payroll data. If investors expect a 50 basis point rate cut, that might be a bit hasty. &#34;From a macro perspective, we believe that the labor market is not as weak. If next week's data is weak, it will only be a bump on the road. Therefore, the Fed's approach is more likely to be gradual.&#34;
<h3>Other Central Banks: Bank of Canada may cut rates next week</h3>
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Wednesday 21:45, Bank of Canada interest rate decision until September 4
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Canada's second-quarter economic growth exceeded expectations, but the decline in per capita GDP and weakening household consumption are expected to prompt the Bank of Canada to cut rates for the third consecutive time next week. Overall, Canada's economy grew steadily in the first half of the year, mainly due to population growth. This may help the country avoid an economic recession. However, households are facing pressure from high borrowing costs. Andrew Grantham, economist at the Bank of Canada, said, &#34;Entering the third quarter, economic momentum is weak, providing ample reason for the Bank of Canada to continue cutting rates.&#34;
A Reuters survey shows that all 28 economists surveyed believe that the Bank of Canada will cut the overnight rate to 4.25% on September 4. Among the 28 economists, 20 believe that the Bank of Canada will cut the overnight rate to 3.75% by the end of 2024, 7 believe it will be cut to 4.00%, and 1 believes it will be cut to 3.50%.
<h2>Important Data: U.S. ISM Data and Non-Farm Report Could Ignite the Market! Can Gold Overcome the &#34;September Curse&#34;?</h2>
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Monday 09:45, China's August Caixin Manufacturing PMI
Monday European session, France/Germany/Eurozone August Manufacturing PMI final, UK August Manufacturing PMI
Tuesday 22:00, U.S. August ISM Manufacturing PMI
Wednesday 09:45, China's August Caixin Services PMI
Wednesday European session, France/Germany/Eurozone August Services PMI final, UK August Services PMI, Eurozone July PPI MoM
Wednesday 22:00, U.S. July JOLTs Job Openings, U.S. July Factory Orders MoM
Thursday 17:00, Eurozone July Retail Sales MoM
Thursday 19:30, U.S. August Challenger Job Cuts
Thursday 20:15, U.S. August ADP Employment Change
Thursday 20:30, U.S. Initial Jobless Claims up to August 31
Thursday 22:00, U.S. August ISM Non-Manufacturing PMI
Friday 17:00, Eurozone Q2 GDP final reading, Eurozone Q2 seasonally adjusted employment change
Friday 20:30, Canada August employment change, U.S. August unemployment rate, U.S. August seasonally adjusted non-farm payrolls, U.S. August average hourly earnings annual/monthly rate
On the eve of the September 18th Federal Reserve meeting, bets will depend on changes in economic data (recent economic data has been volatile).
The July non-farm payroll data triggered a collapse event in early August. Next Friday, the August non-farm payroll data will be released. According to economists compiled by Bloomberg, the expected new job additions are estimated to be between 100,000 and 208,000, with a median of 163,000, and the unemployment rate is expected to gradually decrease to 4.2%.
Next week will also see the release of U.S. ISM Manufacturing/Non-Manufacturing PMI, durable goods orders, and initial jobless claims data. As economic growth becomes the market's sole focus, these data points could all impact market sentiment. Powell previously stated at the Jackson Hole Federal Reserve annual symposium in Wyoming that the &#34;direction of policy going forward is clear,&#34; but &#34;the timing and pace of rate cuts will depend on new data, evolving outlooks, and the balance of risks.&#34;
Analysts point out that the employment data next week is expected to cause volatility in the short trading week. North American markets will be closed on Monday for the Labor Day long weekend. Some analysts suggest that while gold prices have surpassed $2500, the market is neither in a bubble nor extremely overbought. However, the weakness in the U.S. dollar seems somewhat excessive, posing risks to precious metals. The U.S. dollar has been oversold recently, with the latest CFTC data as of August 27 showing that hedge funds, asset management companies, and other participants in the futures market are generally preparing for a decline in the U.S. dollar. Traders have placed bets of around $9.8 billion, believing that the U.S. dollar will further decline, reaching its highest level since January.
In light of this, the upcoming ISM data or non-farm payroll report next week may not need to show significant upside surprises to trigger further short covering in the U.S. dollar and a pullback in gold prices. Goldman Sachs also warns that while tactical positioning changes exist, structural fund flows and the high attractiveness of U.S. assets may limit the decline in the U.S. dollar. However, any weakness in gold prices could be seen as a buying opportunity. U.S. CFTC data shows that in the week ending August 27, speculators' net long positions in COMEX gold rose to a new four-year high.
It is worth noting that since 2017, gold prices have declined every September, with an average decline of 3.2% in September, making it the worst month of the year. This phenomenon is not limited to gold: September is also typically the worst-performing month for the U.S. stock market, with the S&amp;P 500 index averaging a decline of over 1.5% in the past 10 years. September is also traditionally the strongest month for the U.S. dollar.
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Sengbao Bank's Head of Commodity Strategy, Ole Hansen, said, &#34;Seasonal factors indicate that the next month may be challenging.&#34;
Meanwhile, leveraged funds have shifted to bullish on the Euro for the first time since early June, as the market speculates that the European Central Bank's rate cut may be smaller than the Federal Reserve's. Data this week showed that the inflation rates in the Eurozone and France dropped to the lowest level in three years at 2.2% in August, with Germany and Spain also experiencing easing inflation, strengthening the case for a rate cut by the European Central Bank. Investors are betting that the ECB will cut rates two to three more times this year, fewer than the Fed's four times. Investors will be watching next week's release of the Eurozone's August Manufacturing and Services PMI data to see if this expectation will be overturned.
<h2>Company Earnings:</h2>
As earnings season nears its end, next week will focus on earnings reports from Nio Inc. (NIO.N), Broadcom Inc. (AVGO.O), C3.ai Inc. (AI.N), and others.
Despite weakness in the U.S. labor market, traders believe that the world's largest economy will avoid a consumer-led economic downturn. Therefore, they are buying various assets from small-cap stocks to speculative debt. EPFR Global data compiled by Bank of America shows that funds focused on U.S. stocks added $5.8 billion, marking the ninth consecutive week of inflows, while high-yield funds attracted $1.7 billion.
At least for now, neither economic data nor corporate earnings show any signs of danger. However, if there is a lesson to be learned from the collapse in early August, it is that consensus bets—such as going long on artificial intelligence and taking advantage of a weak yen—may suddenly backfire.
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<h2>Market Holiday Schedule:</h2>
On Monday (September 2nd), the New York Stock Exchange will be closed for Labor Day. Trading for CME Group's precious metals and U.S. crude oil futures contracts will end at 02:30 Beijing time on the 3rd, while stock index futures contracts will end at 01:00 Beijing time on the 3rd. Trading for ICE's Brent crude oil futures contracts will end at 01:30 Beijing time on the 3rd

This week, the US PCE inflation data has led to the Federal Reserve's interest rate cut pace becoming less aggressive, resulting in the rise of the US dollar index, despite the strong performance of the US stock market in August. The Dow Jones hit a new high, while the S&P 500 index approached historical highs. Next week, attention will be on the August non-farm payroll report, which may impact the extent of interest rate cuts. Market expectations suggest that if the number of new jobs added is less than 100,000, the pressure to cut rates by 50 basis points will increase. In addition, US oil futures fell by over 3% due to expectations of increased production by OPEC+

- The latest US PCE inflation data suggests a less aggressive rate cut by the Fed next month, with consumer spending surpassing expectations, indicating a robust economy with steady growth. Expectations for a significant rate cut have cooled off post-PCE release, leading to a rise in the US dollar index. Stock markets saw gains, with the Dow hitting a new high and the S&P 500 nearing its peak in August.
- Market focus shifts to crucial August labor market data next week, influencing the Fed's rate decisions. Analysts anticipate a gradual easing cycle starting next month, with the Fed possibly cutting rates four times by December. The upcoming employment data will likely impact market sentiments and the future trajectory of monetary policy.
- Additionally, attention is on the upcoming US ISM data and nonfarm payroll report, potentially affecting market dynamics. Analysts caution against overly optimistic expectations, as strong data may trigger further dollar strengthening and gold price corrections. Seasonal trends suggest a challenging month ahead, with market reactions to economic indicators and central bank actions shaping investment strategies.

Weekly Outlook: US ISM Data and Non-Farm Payrolls Report may trigger market volatility! Can gold overcome the "September curse"?