The week begins quietly on Monday with no scheduled economic events for the FX market. Key announcements are expected on Tuesday, including the RBA’s monetary policy and final manufacturing PMIs for the eurozone and U.S., along with the JOLTS job openings report.
On Wednesday, the U.S. will report the ADP non-farm employment change, while tariffs from President Trump are anticipated. Thursday features inflation data from Switzerland and U.S. unemployment claims, alongside the ISM services PMI.
Labour Market In Focus
Friday will see the U.S. release important labour data, including average hourly earnings and unemployment rates. In Canada, attention will focus on employment changes and unemployment rates.
The RBA is predicted to hold rates steady as inflation cools. Eurozone inflation is above target but is also easing, with expectations for a headline rate of 2.2% and core CPI of 2.5%.
Monetary policy from the ECB may include rate cuts, though defence spending and tariff uncertainties may cause caution. In the U.S., the ISM manufacturing PMI is expected to drop to 49.6, indicating potential contraction, largely due to tariffs.
Tariff Impacts Deepen
Analysts predict pressure on services from weakening manufacturing activity, with tariff uncertainties impacting pricing and purchasing behaviours. Tariffs affecting all U.S. trading partners may provoke retaliatory measures from countries like China.
The U.S. anticipates average hourly earnings of 0.3%, with a slowdown in non-farm employment growth projected at 139K. Government payrolls may decline due to federal employment cuts, highlighting challenges in the private sector.
In Canada, employment change is estimated at 9.9K, alongside a rise in the unemployment rate to 6.7%. Hiring demand appears to be softening, influenced by slower population growth and potential employment constraints ahead.
As we begin the week with little on the calendar, the lull offers a short period of reflection before volatility reawakens. Tuesday’s batch of announcements marks the true start to the action, beginning with central bank decisions out of Australia and key purchasing data for both Europe and the United States. These will provide updated signals on market strength, with traders carefully parsing whether current monetary stances still suit underlying inflation pressures. Interest rate stability remains expected from the antipodean policymakers, suggesting a wait-and-see approach until wage growth or service inflation pick up again.
We read the eurozone’s recent figures as a sign that disinflation remains intact, even if still above target. The narrowing gap in headline and core pricing keeps speculation active on whether the ECB will opt for easier policy. However, we note Draghi’s caution due to unpredictable factors at the policy margins—such as global trade tensions and defence-related expenditure increases. Barring surprises, pricing in the regional bloc holds a slightly cooling tone, giving space for trimming rates, but only incrementally.
Wednesday’s calendar, peppered with employment expectations, invites a sharper focus on U.S. jobs. The private sector measure hints at a slower trend beneath the surface, which aligns with wider evidence of a labour market that may no longer be doing the heavy lifting for headline growth. A key observation: we’ve tracked the ADP print slipping for three consecutive reporting cycles, and although still expansionary, it now contrasts with rising initial claims. This divergence should not be dismissed.
The broader market context becomes more reactive through Thursday. Inflation reports from western Europe could either reinforce or undermine any ECB bias, though it’s the ISM services figure that’s more likely to shape yields into the weekend. The anticipated reading will test whether services can remain resilient as factories lag. S&P Global readings already suggest disconnection between the two sectors. If confirmed, bets on a downturn could become more confident, especially in combination with rising geopolitical tension through proposed cross-border levies.
We note that the tariffs originally aimed at supporting domestic producers have begun shifting sentiment across procurement groups. This feeds directly into purchasing managers’ reports, where delivery times and input costs have spiked. In real terms, the second half of the year faces a growing obstacle in price uncertainty—something that, while often reported in capital goods, now begins to encroach upon finished consumer items. Logic follows that international competitors may no longer absorb the same freight or policy cost adjustments, creating a vacuum that amplifies homegrown pricing volatility.
Into Friday, we expect labour data to serve as the defining event for broader market positioning. A forecasted moderation in average hourly earnings does not undo the year-to-date trend of real pay gains, though it may remove some tightening pressure, especially if headline job creation lags. Looking at the private-public split, the possibility of reduced government hiring weighs particularly heavily. The last round of federal cuts was partially offset by state-level jobs, a pattern that may not hold through Q3.
North of the border, Canada’s employment reading highlights a different kind of deceleration. It’s not pace, but breadth that concerns us. The projected rise in the jobless rate, especially after seasonal adjustment, implies that any broadening in sectoral strength has now paused. The smaller-than-expected gains come just as population growth tapers—a situation that might appear benign, but risks masking structural gaps in hiring capacity, particularly in business services and construction.
Through this lens, we remain attentive to price action across short-term volatility products. Movement around scheduled data will likely stay tied to rate path speculation, especially if Friday’s U.S. report adds evidence to the softening narrative. In the absence of coordinated policy direction, derivative traders must watch for widening bid-ask spreads around FX pairs linked to USD and CAD. Timing, as always, becomes a matter of entries built around release windows—not assumptions.
