It's a busy week ahead in terms of economic events. Monday kicks off with a few notable releases, including the final manufacturing PMI for the eurozone. It’s also a bank holiday in Canada and the U.S. in observance of Labor Day.
On Tuesday, Switzerland will release its CPI data, while the U.S. will report the ISM manufacturing PMI. Wednesday will be eventful, with Australia releasing its GDP for the second quarter. The Bank of Canada will announce its monetary policy decision and in the U.S., the JOLTS job openings and the Beige Book will be released.
On Thursday, RBA Governor Bullock is scheduled to speak at the Anika Foundation in Sydney, where she will take questions from the audience. It's worth paying attention to this event to see if she makes any comments about the latest inflation data, which slightly exceeded expectations in July, indicating that the RBA may need to wait longer before delivering the first rate cut.
In the U.S., key economic data for Thursday will include the ADP non-farm employment change, unemployment claims, and the ISM Services PMI.
On Friday, the U.S. will release data on average hourly earnings, non-farm employment change and the unemployment rate while Canada will also report its employment change and unemployment rate.
Inflation in Switzerland has been stable and is trending lower compared to other developed European countries. The strength of the CHF is not particularly welcomed by the SNB, so there is a possibility that the Bank may take action to counter it. The market is currently expecting a 50 bps rate cut at the next meeting.
As a reminder, September is the last month with Thomas Jordan as Governor, so it remains to be seen whether he will do something memorable—a surprise, as has often been his style—or have a quiet final meeting before being replaced by his successor.
In the U.S., the consensus for the ISM manufacturing PMI is a rise from 46.8 to 47.5, with the final manufacturing PMI anticipated at 48.1, compared to the previous 48.0. ISM manufacturing prices are likely to drop from 52.9 to 52.5. Since the beginning of the year, the manufacturing sector has been under pressure due to higher borrowing costs.
The consensus for the ISM Services PMI is a drop from 51.4 to 50.9. While the services sector has been performing slightly better than the manufacturing sector and returned to expansionary territory last month, this week's data is not anticipated to be very positive. A Fed survey, highlighted by Wells Fargo analysts, indicates that overall service sector activity continues to move sideways, with hiring slowing sharply.
At this week's meeting, the BoC is expected to deliver a 25bps rate cut, bringing the rate down to 4.25%. Recently, inflation data in Canada has started to decline, with no immediate upside risk, the core measure sitting comfortably in the Bank's target.
Another factor supporting a rate cut is the subdued Canadian GDP, along with a labor market that has cooled down, reducing the risk of inflationary pressure. The BoC is expected to keep the door open for further rate cuts through the end of the year, especially if the Federal Reserve also begins to lower rates.
This week’s labor market data will play an important role in shaping the pace of future rate cuts. If the data comes in below expectations, it will likely bolster market expectations for a more dovish stance from the BoC. The majority of analysts currently anticipate that the Bank will reduce rates to 3.75% by the end of the year, but some argue the year will end with 4.0%.
The consensus for employment change is 25.6K, compared to the previous -2.8K, with the unemployment rate expected to decrease from 4.3% to 4.2%.
After the latest remarks from J. Powell at the Jackson Hole Symposium, attention will shift to this week's jobs data, which will provide further insight into the state of the labor market—a growing concern at present. The market is confident that the Fed will deliver a rate cut at the September meeting, but the question remains whether it will be a 25bps or a 50bps reduction.
The U.S. consensus for average hourly earnings is 0.3%, up from the previous 0.2%; non-farm employment change is expected at 164K, compared to the prior 114K, and the unemployment rate is likely to decrease from 4.3% to 4.2%.
This week's labor market data is important for determining whether there is a significant deterioration in employment or if recent figures were partially skewed by Hurricane Beryl's landfall coinciding with the survey week. Additionally, before the Fed's meeting, we'll also receive inflation data, which will help assess the broader economic situation.
After the jobs report, FOMC member Christopher Waller is scheduled to deliver a speech on the economic outlook at the University of Notre Dame in Indiana. It's worth monitoring his remarks, especially if the data will deviate from consensus expectations, even if his views may not reflect those of the entire Fed policy committee.
Wish you a profitable trading week.
