On Tuesday, Australia's monetary policy meeting minutes will be released alongside retail sales data for the month. Wednesday's focus will be on Australia's quarterly GDP data, while Switzerland will release its latest inflation figures. Additionally, final services PMI data will be published for the eurozone, the U.K., and the U.S. The U.S. will also see the release of the ADP non-farm employment change.
On Friday, all eyes in the U.S. will be on key labor market data, including average hourly earnings, non-farm employment change and the unemployment rate. Canada will also release its employment change and unemployment rate figures.
In the U.S., the consensus for the ISM manufacturing PMI is 50.6, slightly down from the previous reading of 50.9, while the ISM manufacturing prices index is expected to rise to 56.2 from the prior 54.9.
The prices paid component remains in expansionary territory, highlighting persistent inflationary pressures. Analysts from Wells Fargo argue that this could complicate the Federal Reserve's policy outlook.
The outlook for the services sector is somewhat more optimistic, as it has remained in expansionary territory since mid-2024. This indicates the sector's resilience despite ongoing economic uncertainty.
In Switzerland, the consensus for the CPI month-over-month is 0.5%, compared to the previous -0.1%. The country's economy expanded by 0.2% q/q in Q4 2024, in line with expectations, while annual growth came in slightly weaker at 1.5%.
At this week's meeting, the ECB is expected to deliver a 25 bps rate cut, with further easing likely until the end of the year.
The economic situation in the eurozone remains uncertain, with Q4 contractions in both Germany and France, providing the ECB with additional reasons to continue reducing interest rates.
This week’s labor market data will be closely watched, especially with the BoC meeting scheduled for next week. Although there has been some improvement in employment figures, the unemployment rate remains higher than it was last year.
While the Canadian job market has stabilized, hiring momentum remains fragile, reinforcing expectations that the BoC will remain cautious about rate cuts.
Analysts at Wells Fargo forecast a slightly higher non-farm employment change of 170K, though forward-looking indicators suggest underlying labor demand is slowing. Small business hiring plans have declined, regional Federal Reserve Bank surveys indicate flat service-sector employment, and job postings remain at multi-year lows. Additionally, consumer confidence in the labor market has weakened.
Wells Fargo expects the unemployment rate to tick up to 4.1%, with federal government payrolls projected to decline by 5K-10K due to ongoing workforce reductions. In the longer term, slower labor force growth—driven by reduced immigration and an aging population—is expected to offset weaker hiring, keeping unemployment near 4% and limiting further declines in wage growth this year.
This article was written by Gina Constantin at www.forexlive.com. Read More Details
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