5 fundamentals for the week: US inflation, ECB decision, court cases promise explosive action

The US labor market grew by only 22K in August, below the already low three-month average of 29K, and far under estimates of 75K. Investors have little time to recover from the Nonfarm Payrolls (NFP) before inflation figures may further complicate the picture for the Federal Reserve (Fed), the US Dollar (USD), Stocks and the Gold price.

1) Two court cases may swing markets

Can Lisa Cook, a Governor at the Fed, vote in next week's rate decision? The court has refrained from ruling on whether she can cling to her position while the case against her dismissal makes its way. If Cook has to wait on the outside, it would set another blow to Fed independence, boosting the Gold price and weighing on Stocks.

Another ruling may happen this week, about US President Donald Trump's request to expedite a Supreme Court decision on the legality of most tariffs. Investors are keen to know when justices will make their decision, after two lower courts deemed the majority of his duties as illegal.

2) US PPI serves as a warm-up to the main dish

Wednesday, 12:30 GMT. The Producer Price Index (PPI) report tends to see-saw from month to month, but the yearly figures still serve as an indicator for inflation, and feed into the Personal Consumption Expenditures (PCE), which is the Fed's preferred gauge of price rises.

Core PPI rose 3.7% YoY in July, and any further advance toward 4% in August would be worrying. In theory, prices at factory gates – another name for PPI – eventually feed into consumer prices.

3) ECB decision may shift from interest rates to shoring up debt markets

Thursday, decision at 12:15 GMT, press conference at 14:45 GMT. After a series of interest rate cuts, the European Central Bank (ECB) is widely expected to leave its borrowing costs unchanged. The bank's main lending rate stands at 2.15% and its deposit rate at 2%, both similar to Eurozone inflation measures.

Is the ECB willing to consider further cuts down the line? That depends on the economic outlook. The Frankfurt-based institution releases new growth and inflation forecasts at this juncture, which may provide hints.

The strengthening of the Euro (EUR) may push prices down, allowing for looser monetary policy, and so could an economic deterioration, as a result of US tariffs or other factors. On the other hand, the Eurozone economies are humming on, emboldening hawks.

Reporters will quiz ECB President Christine Lagarde on future interest rate plans and also on other topics. One issue is the potential buying of Bonds to shore up jittery markets, especially in France, Lagarde's home country. The decision comes during a political crisis in Paris. The ECB President is unlikely to promise any imminent backstopping.

4) US CPI set to trigger massive market movements

Thursday, 12:30 GMT. The Consumer Price Index (CPI) is the main event of the week, and comes while the Federal Reserve (Fed) is in its "blackout period" – when members refrain from speaking on monetary policy in the countdown toward their decision next week.

Investors and the Fed focus on core CPI, which excludes volatile energy and food prices, and it is expected to have risen by 0.3% MoM in August, repeating July's read. The yearly inflation figure advanced to 3.1%, and any further increase would imply fewer interest rate cuts.

Bond markets are currently pricing a 25 basis point rate cut in every one of the three remaining Fed decisions this year. While the September move is all but guaranteed, further cuts in October and December depend on inflation remaining under control. The impact of US President Donald Trump's tariff policy has been minor, but that could change.

5) US Consumer Sentiment has the final word of the week

Friday, 14:00 GMT. The University of Michigan's Consumer Sentiment Index is not always correlated with actual buying, but the release shakes markets. In recent months, the index only moderately bounced from the lows, hitting 58.2 in August. The preliminary read for September is set to rise to 59.2.

Apart from the headline, traders will look at the inflation expectations components, which are relatively hot: 3.5% for the long term, while 4.8% for one year, according to the report for August.

Final thoughts

The fact that the Fed cannot respond to the CPI report may cause some anxiety in markets. Price action could be wild, so trade with care.