There’s a busy week ahead full of economic events to watch for. Today, markets will monitor the manufacturing PMI figures from the eurozone, the U.K., and the U.S. Additionally, Fed Chair Jerome Powell is expected to speak at the Federal Reserve Board of Governors International Finance Division’s 75th Anniversary Conference in Washington, D.C.
Tuesday brings the release of monetary policy meeting minutes in Australia, inflation data in Switzerland and economic indicators from the eurozone. In the U.S., attention will turn to the JOLTS job openings report.
On Wednesday, Australia will publish its quarterly GDP figures, while in the U.S., investors will look for the ADP non-farm employment change. The Bank of Canada will take center stage with its monetary policy announcement, and the U.S. will release the ISM Services PMI.
Thursday’s focus will shift to the European Central Bank’s monetary policy announcement. In the U.S., weekly unemployment claims data will be released. To end the week, Friday will be packed with key labor market data from the U.S., including average hourly earnings, the non-farm employment change, and the unemployment rate. Canada will also release its employment change and unemployment rate.
Throughout the week, several FOMC members are expected to deliver remarks, which may offer further insight into the Fed’s policy outlook.
In the U.S., the consensus for the ISM manufacturing PMI is 49.3 vs. 48.7 previously. Following the recent decline in the manufacturing sector, a modest improvement is expected in this week’s data. However, the overall outlook remains weak, as ongoing uncertainty around tariffs continues to weigh on sentiment and activity.
The anticipated improvement can largely be attributed to a temporary pause on some China-related tariffs, which has eased trade tensions slightly. Still, the ISM manufacturing index is expected to remain in contractionary territory, though with less downward pressure than in the previous month.
In Switzerland, the consensus for the CPI m/m is 0.2%, compared to the prior reading of 0.0%.
Swiss CPI data is expected to show a further slowdown, with headline inflation projected to dip by 0.1% y/y and core figures also easing. The headline inflation has been trending lower for the past two years, and April’s flat reading puts it on the verge of falling below the Swiss National Bank’s 0-2% target range.
With markets already anticipating a 25 bps rate cut in June, soft CPI and Q1 GDP prints could solidify that expectation, Wells Fargo analysts said.
At this week’s meeting, the BoC is widely expected to keep rates on hold. As a reminder, the Bank paused its easing cycle at the last meeting after a rapid series of cuts totaling 225 bps over the past year.
Although some analysts argue that the BoC may resume rate cuts, recent data has been mixed. Supporting the case for further easing are signs of softening in labor market conditions and a cooling housing market, according to analysts from RBC.
Consumer spending has held up better than expected, despite weaker sentiment indicators. Inflation surprised slightly to the upside in April, driven mainly by domestic service costs rather than tariff effects. With key data, including May jobs and trade figures, set to be released after the rate decision, the BoC is likely to adopt a cautious stance for now, opting to reassess once more information becomes available.
Overall, the Bank is expected to keep the door open for further easing. With inflation showing renewed signs of progress toward the 2% target and external headwinds such as tariff pressures weighing on growth, the BoC is likely to resume rate cuts in July and October, with two additional 25 bps reductions anticipated by Wells Fargo analysts.
In the U.S., the consensus for the ISM services PMI is 52.0 vs. the prior 51.6. Compared to the manufacturing sector, the ISM services index has managed to stay in expansionary territory, largely because it is less directly affected by tariff-related disruptions.
That said, the index still includes sectors connected to goods such as construction and transportation alongside traditional service industries like healthcare and finance. With trade tensions easing somewhat over the past month, analysts at Wells Fargo anticipate a modest improvement in the services index.
They also noted that although not included in the headline figure, the “prices paid” component will be closely watched as an indicator of inflationary pressure. Regional Federal Reserve surveys point to a slower rise in input costs recently, yet a significant number of firms continue to report elevated expenses suggesting that the recent downward trend in consumer price inflation may be approaching a turning point.
At this week’s meeting, the ECB is expected to deliver a 25 bps rate cut, bringing the deposit rate down to 2.00%.
Although recent Eurozone data have painted a mixed picture, easing inflationary pressures and ongoing global uncertainties are likely motivating the ECB to lower rates further in an effort to support growth.
While inflation has not yet sustainably returned to the 2% target, the outlook suggests a gradual economic slowdown rather than a sharp downturn. With policy rates approaching a neutral level, the ECB’s rate-cutting cycle is expected to conclude by the third quarter.
Markets currently anticipate additional 25 bps cuts in both June and September, which would bring the deposit rate down to 1.75%.
In the U.S., the consensus for average hourly earnings m/m is 0.3% vs. the prior 0.2%. The non-farm employment change is expected at 130K compared to the previous 177K, while the unemployment rate is projected to remain unchanged at 4.2%.
Analysts from Wells Fargo noted that the report will capture hiring activity in the initial weeks following the “Liberation Day” tariff announcement and will reflect broader hiring trends amid growing concerns over economic policy. They also pointed out that job postings on Indeed.com have dropped to their lowest levels since 2020, and small business hiring intentions are near cyclical lows.
Employment indicators from PMI surveys continue to suggest potential contraction. Given that May typically sees strong hiring, the current softness may be further magnified by seasonal expectations. Companies are exercising caution not only in new hiring but also in staff retention. However, with layoffs still relatively subdued, a sharp drop in net employment is unlikely.
Overall, labor market conditions are cooling, but the unemployment rate is expected to remain steady at around 4.2% through May.
The previous employment change in Canada was 7.4K and the unemployment rate stood at 6.9%. Labor market weakness remains a key concern ahead of Friday’s May employment report.
In April, there was a sharp loss of 30,600 manufacturing jobs which represented the worst decline since the pandemic and pushed the unemployment rate up from 6.6% in Q1 to 6.9%. While May’s figures are expected to show flat employment and a steady jobless rate, continued softness in the industrial sector could strengthen expectations for BoC rate cuts later this year, particularly if hiring fails to recover.
This article was written by Gina Constantin at www.forexlive.com.
