US second-quarter unit labour costs increased by 1.0%, compared to the expected 1.2%. The preliminary estimate was a rise of 1.6%.
The ISM August services PMI was 52.0, which was above the anticipated 51.0. Meanwhile, the US September S&P Global final services PMI was 54.5, slightly lower than the 55.4 preliminary figure.
S&P 500 Experiences Small Gain
The S&P 500 experienced a small gain at the day’s start, with ISM services data anticipated next. This week’s data suggests an economy that is slowing down but not collapsing.
Canada’s trade balance for July was -4.94 billion, greater than the -4.75 billion forecasted. A general risk warning advises that foreign exchange trading involves a high risk that may not be suitable for everyone, especially due to leverage, which increases exposure to risk and potential losses.
It is crucial to consider investment goals, experience level, and risk tolerance before engaging in foreign exchange trading. It is also advised not to invest money you cannot afford to lose.
The latest data showing unit labor costs rising only 1.0% is a significant development for us. After watching the core Consumer Price Index (CPI) hover stubbornly around 3.1% through the summer of 2025, this is the kind of disinflationary signal the Federal Reserve has been waiting to see. This development is already causing a shift in interest rate futures, which now suggest a greater chance of a rate cut in the first half of 2026.
Economic Resilience and Political Risks
However, the economy is not showing signs of a major slowdown, as evidenced by the stronger-than-expected ISM services PMI of 52.0. This resilience aligns with the recent Q2 2025 GDP reading, which showed the economy growing at a respectable 2.1% annualized rate. This “soft landing” scenario, with easing inflation and steady growth, generally supports a cautiously optimistic stance on equity index futures.
A significant risk on the horizon is the renewed discussion of a 15-20% minimum tariff on all EU goods. This political uncertainty is the primary driver behind the recent drop in the EUR/USD pair below the 1.05 mark. We are seeing traders actively buying put options on the Euro to hedge against further potential declines driven by trade friction.
This clash between positive domestic economic data and external political risk is a recipe for increased market volatility. We recall the sharp market swings during the 2018-2019 trade disputes, which saw the VIX index spike above 25 on several occasions. As a result, using options to define risk, such as buying protective puts on the S&P 500, is becoming a more prudent strategy for the coming weeks.
