Monday starts slowly, with no major scheduled economic events for the FX market. On Tuesday, the U.K. will release final GDP q/q data, while Canada will also publish its GDP m/m. In the U.S., the focus will be on the CB consumer confidence and JOLTS job openings figures.
Wednesday brings manufacturing PMI releases for the Eurozone, the U.K., and the U.S., along with inflation data for the eurozone. Fed Chair Kevin Warsh is also scheduled to participate in a discussion titled “Policy Panel” at the ECB Forum on Central Banking in Sintra. BoE Governor Andrew Bailey and ECB President Christine Lagarde are also scheduled to speak.
These types of events typically do not generate market volatility, but traders will pay close attention to Warsh’s comments. His remarks are expected to focus more on long-term strategy rather than near-term monetary policy decisions.
Warsh is likely to discuss broader topics such as central bank communication, the Fed’s balance sheet, alternative data, artificial intelligence, and productivity, while emphasizing price stability and a patient approach to policy.
Thursday, Switzerland will publish its CPI data and the U.S. will release the average hourly earnings m/m, the non-farm employment change and the unemployment rate. Finally on Friday we'll get services PMIs for the eurozone and the U.K.
In Canada, the consensus for GDP m/m is 0.4%, compared to the prior -0.1%. The small increase is mainly driven by a rebound in the mining, oil, and gas sectors, according to RBC analysts.
Stronger oil production, increased drilling activity, and improving manufacturing conditions are expected to support solid growth in goods-producing industries. Meanwhile, growth in the services sector is likely to remain modest and weakness in wholesale trade and flat retail activity is offset by improvements in areas such as real estate and rental services following a recovery in home resale activity.
While preliminary monthly GDP estimates are often subject to revisions, incoming data suggests that economic activity strengthened further in May. Labour market conditions improved, housing market activity continued to recover, and advance indicators point to firmer retail and manufacturing sales, suggesting that consumer spending remains relatively resilient.
At the same time, the recent decline in global oil prices could provide some relief to households by lowering fuel costs, supporting purchasing power while reducing the risk of broader inflationary pressures extending beyond the energy sector.
June inflation data for the Eurozone is expected to show a moderation, with headline CPI forecast to decline from 3.2% to 3.0%, while core inflation is expected to ease from 2.6% to 2.5%.
Lower energy prices are one of the main drivers behind the expected slowdown, with business surveys also pointing to easing input cost pressures.
Regarding monetary policy, the ECB is expected to keep rates unchanged at its July meeting as policymakers assess the potential implications for global energy markets stemming from the new developments in the Middle East and the Strait of Hormuz.
A rate hike might be considered for the September meeting, but several factors could argue against it, including a weaker growth outlook, softer core inflation, or continued concentration of price pressures in specific sectors. These factors could strengthen the case for a prolonged pause.
In the U.S., the consensus for the average hourly earnings m/m is 0.3% vs. 0.3% prior; non-farm payrolls are expected to rise by 114K, compared to 172K previously; and the unemployment rate is expected to remain unchanged at 4.3%.
The U.S. labour market continues to stabilize. While the forecast is centered around 110K–120K new non-farm payrolls, which would not represent a particularly strong reading, it would extend the recent improvement in hiring and is seen as sufficient to keep expectations for a restrictive Federal Reserve policy intact.
Recent labour market figures present a mixed picture. Low jobless claims and firmer regional Fed employment surveys point to stable hiring conditions, but softer job postings and weaker private-sector hiring indicators suggest that labour demand is no longer strengthening meaningfully. Analysts from Wells Fargo point out that May’s payroll gains were also supported by sectors that may not be able to sustain the same pace of hiring going forward.
Wage growth remains contained and there are no signs of renewed labour market overheating. Meanwhile, lower energy prices are expected to ease inflation pressures in the coming months and provide some support for consumer spending and broader market sentiment.
