Financial markets have closed in a sideways pattern last week, whereas the much weaker than expected NFP report caused an initial rise in equities because of the expectation that the Fed will cut interest rates rather soon due to the disappointing data. Fresh liquidity will support markets and usually finds their way into the stock market. Such trend might continue to lift markets higher. Worth noting, though, that markets were not able to continue with more upside and instead profit taking caused prices to move lower in the end.

In particular oil prices closed in the red last week, indicating that further economic headwinds might be around the corner. This week’s consumer price index as well as the interest rate decision of the ECB should determine further market momentum. The month of September is usually a very volatile month for equities and hence caution should be applied.

Important events this week:

– EU interest rate decision– The interest rate decision of the ECB is not expected to move markets much, as the rate is expected to remain unchanged. Yet, the press conference could offer market participants further insights into the next steps of the ECB. The impact of the news might also impact the German stock index, the DAX, causing the market to act volatile.

DAX weekly chart

The DAX (GER40) index shows that the upside seems to remain limited. With the likelihood that US indices might correct also the DAX could weaken further. A break below the important zone of 23.300 points would indicate potential further losses A target could then be the 50- moving average, which currently sits at about 22,140 points. The news will be released on Thursday, 11th September at 14:15 CET.

– US consumer price index – The US consumer price index for August is expected to rise on a monthly basis resulting in a price increase of 2.9% on a yearly basis. During the Jackson Hole symposium Jerome Powell, the head of the Federal Reserve central bank, pointed out that he is prepared to cut interest rates as the economic situation has been changing. However, the focus might be on a lower inflation rate. A rise in prices might cause the Dollar to rise slightly less as compared to weaker prices, which could cause the Greenback to lose more momentum due to the current market sentiment.

GBPUSD monthly chart

The GBPUSD currency pair shows a strong trend to the upside but might also offer some weakness due to the strong technical resistance zone, which has been tested in July. Any push below the 1.3350 support zone might indicate that the price could push lower, which could be the case if consumer prices come in lower. Vice versa the uptrend might gear up some traction in particular above the zone of 1.3740. The news will be released on Thursday, 11th September at 14:30 CET.