It's a quiet day on Monday in terms of scheduled economic events, which is typical for the week following the release of the U.S. NFP data.
On Tuesday, attention will shift to Australia with the release of the Westpac consumer sentiment and NAB business confidence data. In the U.K., key labor market data will be reported, including the claimant count change, the average earnings index 3m/y, and the unemployment rate. Additionally, Bank of Canada Governor Macklem is scheduled to speak at the Canada - United Kingdom Chamber of Commerce in London.
Wednesday will bring the U.K. GDP m/m data, but the main focus of the day will be on the U.S. inflation report, which is considered the highlight of the week.
On Thursday, the eurozone will see the ECB's monetary policy announcement while in the U.S., markets will watch the PPI m/m, PPI m/m, and unemployment claims figures closely.
Finally, on Friday, the U.S. will release preliminary data for the UoM consumer confidence and UoM inflation expectations, rounding off the week's economic events.
In the U.K., the consensus for the claimant count change is 95.5K, down from the prior 135.0K. The average earnings index 3m/y is expected to come in at 4.1%, compared to the previous 4.5%, while the unemployment rate is likely to decrease from 4.2% to 4.1%.
Last month saw a big drop in unemployment, but analysts argue this could be due to issues with data collection as it's now harder to convince people to respond to surveys and do so accurately. The focus will primarily be on wages, which have also seen a decline. However, the BoE is not heavily focused on the jobs report at this time, and it is expected to keep its monetary policy unchanged at the next meeting.
For Canada, BoC Gov Macklem's speech is not expected to be a market moving event. Last week at the meeting the Bank delivered a 25 bps rate cut, taking its policy rate at 4.25%, but its announcement was seen as dovish by the market. The Bank mentioned downside risks to growth outlook for the remainder of the year after economic activity already showed signs of softness in June and July. This makes it more likely that the pace of easing will be steady with 25bps cuts expected in October and December.
The consensus for the U.K. GDP m/m data is 0.2%, compared to the previous 0.0%. This week's data will provide insight into the current performance of the economy which saw strong growth during the first part of the year but lost momentum in June. The BoE will closely monitor GDP as it could influence the pace of future rate cuts.
On Friday, U.S. jobs data did little to clarify whether the Fed will opt for a 25bps or 50bps rate cut, as the figures were not as bad as feared. The NFP printed below expectations, but the unemployment rate and the average hourly earnings both saw improvements. However, prior revisions to the NFP are concerning, and it’s possible the most recent report will also be revised. The U.S. labor market is clearly softening, and the Fed has made it clear that this trend is not welcome.
At the September meeting, the market expects a 25 bps rate cut. The only notable data point before the meeting is the CPI report, which is likely to show a further decline in the y/y rate, bringing inflation closer to the Fed’s 2% target.
For this week's print, the overall CPI is expected to rise by 0.2%, but this will push the y/y CPI rate down to 2.6%, a level not seen since March 2021. Food inflation has shown little change, but the energy costs have declined.
At this week's ECB meeting, a 25bps rate cut is expected, bringing the deposit rate down to 3.5%. Recently, economic data from the eurozone has been mixed, though inflation has shown progress, with headline inflation coming in at 2.2% y/y. The main issue lies with services inflation, which remains stubborn at 4.2%. This is the primary reason the ECB has been cautious about delivering more aggressive rate cuts.
The market will also pay attention to the ECB's updated economic projections, which could be revised higher compared to the previous forecast in June. The ECB has stressed that it's taking a data-dependent meeting-by-meeting approach to rate cuts.
