It’s a light week ahead in terms of economic events for the FX market. Monday starts off quietly, with no significant data scheduled.
On Tuesday, the key release will be the ISM Services PMI from the U.S. and on Wednesday, New Zealand will publish its quarterly employment change and unemployment rate.
Thursday’s highlight will be the Bank of England’s monetary policy announcement and the U.S. will release the weekly unemployment claims data followed by the Canadian employment change and unemployment rate on Friday.
Throughout the week, remarks from various FOMC members are expected.
In the U.S., the consensus for the ISM services PMI is 51.5 vs 50.8. While the index edged up to 50.8 in June, uncertainty remains over the sector’s momentum.
A recent regional purchasing managers’ survey showed only marginal improvement in July, reinforcing concerns that the services sector continues to struggle to gain traction. One of the key headwinds is rising input costs, with the ISM prices paid component approaching levels not seen since the pandemic.
This backdrop of elevated costs and subdued demand is likely to limit any meaningful near-term acceleration in services activity, according to Wells Fargo analysts. Combined with soft labor market signals from the July employment report, the overall outlook remains cautious.
In New Zealand, the consensus for the employment change q/q is -0.1% vs prior 0.1%; the unemployment rate is expected to rise from 5.1% to 5.3%; and for the labor cost index, the consensus is 0.5% vs prior 0.4%.
If wage growth remains subdued, the data would reinforce the narrative of a cooling labor market. With inflation now within the RBNZ’s target band, a soft employment report would likely provide the final justification for a policy rate cut at the upcoming meeting.
Market expectations currently point to a 25 bps cut in August, and the Bank has already signaled that rate reductions will follow if inflation continues to moderate.
At this week’s meeting, the BoE is widely expected to deliver a 25 bps rate cut, despite persistent inflationary pressures and slowing economic momentum in the U.K.
Traders will closely watch Governor Bailey’s remarks for any signals on the future path of monetary policy. He is likely to emphasize a cautious and measured approach to further easing.
The U.K.’s GDP declined in both April and May, and PMI data has softened. However, inflation remains sticky, and wage growth, though easing slightly, has stayed resilient, particularly in the private sector.
The BoE is likely to project inflation gradually returning toward its 2% target without significantly undershooting it. As a result, the central bank is expected to adopt a tone consistent with steady, quarterly rate cuts rather than an aggressive easing cycle.
In Canada, the consensus for employment change is 15.3K vs the prior 83.1K, while the unemployment rate is expected to rise from 6.9% to 7.0%.
Importantly, underlying labor market dynamics remain uneven. Weakness continues to be concentrated in goods-producing sectors, particularly manufacturing, due to ongoing trade headwinds. Meanwhile, services have anchored employment growth and accounted for most job creation since last summer, according to analysts from RBC.
This sectoral split is expected to persist, with education potentially adding short-term volatility due to seasonal fluctuations. Looking ahead, labor market softness may be approaching a turning point, assuming trade relations with the U.S. don’t deteriorate further.
Early GDP estimates suggest current U.S. tariffs are having less impact than initially feared, which could help support the broader economic outlook.
This article was written by Gina Constantin at investinglive.com.