Markets generally dislike uncertainty.

Yet, that doesn’t stop traders and investors from trying to price in what they think is likely to happen in their view.

And if the official outcome doesn’t pan out according to market expectations, that usually triggers major volatility in prices, as positions are swiftly unwound.

With all that in mind, brace for potential surprises out of the OPEC+ and ECB meetings in the coming week, held alongside these major economic data releases and events:

Monday, September 5

• JPY: Japan August services and composite PMIs (final)
• AUD: Australia August inflation, services and composite PMIs (final)
• CNH: China August Caixin services, composite PMIs
• EUR: Eurozone July retail sales, August services and composite PMIs (final)
• Brent: OPEC+ meeting
• GBP: New UK Prime Minister to be announced
• US markets closed for Labor Day

Tuesday, September 6

• AUD: Reserve Bank of Australia policy decision
• EUR: Germany July factory orders

Wednesday, September 7

• AUD: Australia 2Q GDP
• CNH: China August external trade
• EUR: Eurozone 2Q GDP (final), Germany July industrial production
• GBP: Bank of England Governor Andrew Bailey to appear before Treasury Committee
• CAD: Bank of Canada rate decision
• USD: Fed Beige Book, Cleveland Fed President Loretta Mester speech
• Apple’s “Far Out” event: latest iPhone and Apple watch release

Thursday, September 8

• JPY: Japan 2Q GDP (final)
• AUD: Australia July external trade, RBA Governor Philip Lowe speech
• EUR: European Central Bank rate decision
• USD: US weekly jobless claims
• USD: Fed Speak – Fed Chair Jerome Powell, Chicago Fed President Charles Evans, Federal Reserve Bank of Minneapolis President Neel Kashkari
• US crude: EIA weekly oil inventory report

Friday, September 9

• CNH: China August CPI and PPI
• CAD: Canada August unemployment

Brent oil has plunged below the psychologically-important $100/bbl mark this week, halving its year-to-date gains down to 28% at the time of writing.

Oil prices have been dragged lower by the risk-off mood across markets, amid concerns that global demand for the commodity is being eroded by the wave of policy tightening around the world.

The lockdown in Chengdu has further dampened the demand outlook, while the greenback’s recent surge also weighed on this dollar-denominated commodity.

In the lead up to the coming week’s OPEC+ meeting, the alliance’s de facto leader, Saudi Arabia, had floated the idea of triggering a supply cut, which would be in stark contrast to the series of gradual output hikes as OPEC+ restored supplies that were shuttered since the pandemic.

Markets are mostly expecting OPEC+ to keep its production levels steady come Monday.

Should OPEC+ indeed tighten the oil taps, such a surprisingly swift pivot may trigger a knee-jerk surge in Brent prices, although the move is likelier to shore up support for oil prices around the $100/bbl mark.

ECB to join “supersized” rate hike club?

The European Central Bank (ECB) is also due to make its next rate decision on Thursday.

With the headline CPI climbing to a new record, registering a 9.1% year-on-year growth in August, there clearly is a case for the ECB to step up its rate-hiking game.

At the time of writing, markets are pricing in an 86% chance that the ECB will trigger a “supersized” 75-basis point hike next week.

That would be larger than July’s 50bps hike, and also three times bigger than the traditional 25bps rate adjustments per policy meeting adopted by major central bankers.

While a 75bps ECB hike may help shore up immediate support for the euro, the shared currency remains weighed down by the souring outlook for the Eurozone.

Amid an energy crisis that’s at risk of worsening, more of such larger-than-usual rate hikes would only ramp up the risk of a recession for the Eurozone economy.

However, should the ECB surprise markets by triggering a relatively-dovish 50bps hike, that could open the 0.99 floor below EURUSD.

Overall, markets remain bearish on the euro’s prospects, with markets predicting a greater-than-even chance (51.3%) that EURUSD could fall to as low as 0.986 in the coming week.