During the previous week, inflation data in the eurozone indicated a slowdown. However, the labour market remains tight, indicating ongoing strength in employment conditions. In the United Kingdom, concerns regarding economic growth persist, but for the time being, the country managed to avoid a recession with a slight gain of 0.1% in its economic output.

Federal Reserve Chair Jerome Powell made remarks emphasizing that two more interest rate hikes are likely to be implemented this year as part of the effort to address persistent inflationary pressures. Ahead of the next FOMC meeting, the labour market data and the CPI print will be significant factors that may influence the Fed's decision-making process. However, at present, a rate hike appears highly probable. Only if data falls well below expectations would it potentially impact the Fed's plans to proceed with rate increases and lead to a potential pause in the tightening cycle.

This week brings forth several significant events across different economies:

On Monday, attention will be on the United States as the ISM Manufacturing PMI and ISM Manufacturing Prices data are released. Tuesday holds an important event for Australia, as the Cash Rate decision and the RBA Rate Statement are announced, while the U.S. observes Independence Day.

Wednesday marks the OPEC Meetings, where discussions regarding oil production and related policies take place. Furthermore, the United States will release the FOMC Meeting Minutes, offering insights into the discussions and decisions made by the central bank regarding monetary policy. On Thursday, the focus shifts to the United States once again, with the release of the ADP Non-Farm Employment Change, unemployment claims, ISM Services PMI, and JOLTS Job Openings.

Friday brings attention to the United Kingdom, where BoE Governor Andrew Bailey will participate in a panel discussion at the Economic Meetings of Aix-En-Provence in France. Meanwhile, in Canada, the employment change and unemployment rate figures will be announced. In the United States, key data points to watch for include average hourly earnings m/m, non-farm employment change, and the unemployment rate.

The consensus for the ISM Manufacturing PMI is to rise from 46.9 to 47.2 while the ISM Manufacturing Prices are expected to register a small drop from 44.2 to 44.0.

Lately the manufacturing sector has been negatively impacted by high rates making capital investment expensive and causing demand to slow down. The manufacturing sector is still in a contractionary area and the trend might continue over the coming months, while the services sector is being supported by new orders, but growth is slowing.

In Australia, it is anticipated that the RBA will maintain interest rates at 4.1%, based on consensus forecasts. Additionally, the inflation data is expected to show a cooling trend. In May, y/y inflation figures recorded a large fall from 6.8% to 5.6%. Notably, following the higher-than-expected inflation figures in April, the RBA hiked the interest rate as part of their efforts to address elevated levels of inflation. At present, it is unlikely that the RBA will pursue another rate hike. However, it should be noted that the hiking cycle may not be over yet, as market expectations suggest the possibility of another increase, potentially in September due to a big y/y spike in electricity prices that will be reflected in the July inflation data.

Considering the recent surprises from the RBA, it is advisable to stay prepared for any unexpected outcomes or decisions that may arise during the upcoming meeting.

Nothing significant is expected from BoE Gov Bailey's speech at the Economic Meetings of Aix-En-Provence, in France, but it's worth keeping an eye on it in case he mentions something about rate hikes.

For Canada the employment change is expected to print at 22.0K and the unemployment rate to remain unchanged at 5.2%. Last week the Canadian inflation data showed some signs of cooling down and analysts' opinions are split on the next BoC meeting where a hike is expected. This week's labour data might provide some clues. If the job market remains tight then another rate hike might be on the table for the July 12 meeting because as long as wage growth is strong and inflation data runs hot the BoC will act accordingly.

Last month the NFP data in the U.S. printed strong, but for this week a drop from 339K to 222K is likely. The unemployment rate also is expected to drop from 3.7% to 3.6% while the average hourly earnings m/m will increase only slightly by 0.3%. Overall, the jobs market is still tight, and while some easing is happening, it appears to be a rather gradual one. This week's data along with the next CPI report will weigh on the Fed's decision on whether to hike the federal funds rate at the next meeting or not. If we get hot data then a hike is probably, while soft data will point towards a pause.

This article was written by Gina Constantin.