Fin-X Weekly 8th September 2025

Global bonds sold off before recovering as weaker US labour data boosted expectations of Fed rate cuts, while gold hit new highs and the US dollar softened.

US unemployment rose to the highest level since 2021, prompting markets to price in up to three rate cuts by year-end, though FOMC members remain divided.

Australian GDP surprised to the upside, supported by robust household spending, which pared back RBA rate cut forecasts and lifted the Aussie dollar.

This week’s focus will be on US inflation figures and jobs data revisions, the ECB meeting, as well as Australian business and consumer confidence surveys.

As US markets reopened after the long Labour Day weekend, global bonds faced renewed selling pressure amid concerns over inflation, heavy government borrowing, and fiscal discipline. The US dollar softened, while gold broke decisively out of its recent trading range to reach all-time highs.

Treasury yields jumped early in the week as a court decision invalidating much of the Trump administration’s tariff regime raised the prospect of the government having to repay previously collected duties. This development further strained an already challenging fiscal position. Benchmark 30-year yields approached 5% as investors weighed the implications of the announcement. President Trump has asked the Supreme Court to rule swiftly on his appeal against the lower court rulings, with hearings possible as soon as October.

Bond markets elsewhere echoed these concerns. Yields on UK and Japanese debt rose due to concerns about the impact of heavy government spending. Britain’s fiscal challenges are now in sharper focus, with the UK’s 30-year gilt yield reaching multi-decade highs. This has intensified the strain on the government’s balance sheet, increasing debt-servicing costs and narrowing Chancellor Rachel Reeves’s policy options. She faces the delicate task of convincing investors of fiscal credibility when she delivers the budget on 26th November.

In Europe, headline inflation surprised to the upside, rising to +2.1% in August from +2.0% in July. Core inflation was expected to fall slightly, but remained stable at +2.3%. The European Central Bank is expected to maintain policy rates at 2% this week. The higher-than-expected readings have drawn attention to the persistence of price pressures, complicating the near-term policy outlook.

In the US, equities recovered midweek, supported by a pullback in yields after softer labour market data fuelled expectations of monetary easing. Investors are now fully pricing in a quarter-point cut at the Federal Reserve’s 17th September meeting and anticipate three cuts by year-end.

The ISM manufacturing survey disappointed at the headline level, but underlying details were more encouraging, with both new orders and employment showing improvement. Softer input costs should also provide some relief to policymakers, particularly against the backdrop of easing tariff-related pressures.

Still, labour market data added to concerns about slowing momentum. August’s unemployment rate rose to 4.3%, the highest since 2021, with non-farm payrolls expanding by just +22k.

For the first time since 2021, the number of unemployed Americans exceeded the number of job openings, according to the JOLTS survey. Upcoming QCEW revisions may further downgrade historical employment figures, underlining the fragility of the jobs market. The Fed’s Beige Book also highlighted consumer weakness, reporting that many households were “failing to keep up with rising prices” and that consumers were being squeezed by higher costs for insurance, utilities and other essentials.

Policy signals from the Federal Reserve were mixed. Governor Christopher Waller suggested multiple cuts may be warranted in the coming months, while Atlanta Fed President Raphael Bostic maintained that just one reduction is appropriate this year. Chicago Fed President Austan Goolsbee emphasised that decisions must be based on both broader employment and inflation data. This week’s CPI release is expected to show inflation edging up from +2.7% to +2.9% yoy in August.

Still pushing for lower rates, President Trump announced that Christopher Waller was among the three leading candidates to succeed Jerome Powell, along with National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh.

Australian data stood in contrast to softer conditions abroad, with GDP for the second quarter surprising to the upside. Output expanded by +0.6% over the quarter and +1.8% compared to June 2024, supported by resilient household spending. The Australian Bureau of Statistics noted that strength was partly driven by increased spending on recreation and by discount-driven purchases at the end of the financial year. However, July household spending remained robust, rising by +0.5% during the month and by +5.1% from a year earlier. Non-discretionary categories led the gains, while discretionary segments showed more subdued growth.

Markets responded by reducing expectations for significant near-term policy easing, with pricing now reflecting between one and two more Reserve Bank of Australia cuts this cycle. Governor Michele Bullock reinforced this outlook, stressing that persistent consumer strength could constrain the Bank’s ability to lower rates further. The Australian dollar firmed as investors adjusted rate expectations.

In corporate news, Broadcom’s share price surged +12.6% after announcing a partnership with OpenAI to develop artificial intelligence accelerators. Orders for the chip have already exceeded US$10 billion, with production scheduled to start in 2026.

Alphabet also advanced +10.1% after a favourable US antitrust ruling offset an EU fine. The American court decided that Google would not be forced to divest its Chrome browser. The EU fine of nearly €3 billion was for abuse of market dominance, with Brussels emphasising that “true freedom means a level playing field, where everyone competes on equal terms”. President Trump responded angrily and threatened a probe that could prompt fresh tariffs in response.

Geopolitical relations were more cordial elsewhere. China hosted leaders from India, Russia and North Korea at the Shanghai Cooperation Organisation summit, prompting speculation over deepening alliances outside the US sphere of influence. President Trump posted that it “looks like we’ve lost India and Russia to deepest, darkest China”.

Meanwhile, Russia was accused of interfering with the navigation system of a plane carrying European Commission President Ursula von der Leyen, further souring relations with the West.

In Ukraine, the government unveiled a new long-range missile, dubbed the “Flamingo”, which is reportedly capable of reaching Moscow.

A summit in Paris saw President Emmanuel Macron secure commitments from 26 allied nations to deploy troops “by land, sea or air” to support security if a ceasefire emerges. President Putin dismissed the initiative, warning that any foreign troops deployed to Ukraine would be treated as “legitimate targets”.

Over the weekend, OPEC+ moved closer to approving a modest increase in oil production, reversing some earlier cuts.

Looking ahead to this week, key releases include the US CPI and PPI inflation updates, revisions to labour market data, and the European Central Bank’s policy meeting. In Australia, the NAB Business Survey and Westpac Consumer Confidence Index are due out tomorrow.

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