Insights 
VT 
Next week will focus on vital economic reports, notably the US NFP report along with ISM Services and Manufacturing PMI. Key data from Canada on jobs, the EZ Flash CPI, UK Retail Sales, and Australian GDP will also capture attention.
Monday sees the observance of US Labor Day. Reports to monitor include South Korean Trade Balance (Aug), Chinese Caixin Manufacturing PMI (Final), and PMI data from the EZ, UK, and US. New Zealand’s Terms of Trade (Q2) will also be released.
Econometric Highlights
Tuesday features South Korean CPI (Aug), the EZ Flash HICP (Aug), and US ISM Manufacturing PMI (Aug). Notably, the EZ Flash HICP is projected steady at 2.0% Y/Y, with slight variations anticipated in services and headline components.
Wednesday’s highlights include an announcement from NBP, Australia’s GDP figures (Q2), US ADP National Employment (Aug), and PMI reports from China, the EZ, UK, and US. US Durable Goods orders (Jul) will be reported as well.
Thursday’s announcements include Swedish CPIF (Aug) and US ISM Services PMI (Aug), with Sweden anticipative of policy decisions hinging on CPIF metrics aligning with Riksbank’s outlook.
Friday draws attention to UK Retail Sales (Aug), EZ GDP (Q2), the US Jobs Report (Aug), and the Canadian Jobs Report (Aug). The US job report anticipates 75k nonfarm payroll additions and a slight rise in unemployment, impacting Fed policy considerations. The Canadian jobs data will influence the BoC’s rate path, aligning with ongoing trade assessments.
Market Volatility Factors
With the U.S. jobs report coming on Friday, we are bracing for significant volatility in Treasury futures and the dollar index. The market has already priced in an 85% chance of a Fed rate cut in September, especially after Powell’s recent warnings about the labor market. The latest weekly jobless claims figure of 245,000 reinforces this expectation of a weaker jobs report, making any upside surprise potentially explosive for interest rate markets.
The ISM manufacturing and services reports on Tuesday and Thursday will be critical for gauging the U.S. economy’s momentum. We saw manufacturing rebound strongly in the S&P flash reading, a significant shift from the divergence we observed through much of 2024. If both ISM reports confirm this broad-based strength, it could challenge the market’s high conviction for a September rate cut and lead to a repricing in Fed Funds futures.
We are watching Tuesday’s Eurozone inflation data closely, as it could sway the European Central Bank’s thinking. While headline inflation is expected to remain around the 2.0% target, any weakness could amplify calls for a rate cut, especially with the strengthening Euro. Options on Euro Stoxx 50 futures could be used to hedge or speculate on the policy outcome, as a dovish signal would likely boost equities.
The Australian GDP report on Wednesday is expected to confirm a stalling economy, which aligns with the Reserve Bank of Australia’s dovish outlook. Last month’s retail sales data, which showed a sluggish 0.1% rise, has already set a low bar for this release. Therefore, while the base case is for continued weakness in the Aussie dollar, traders should be wary of a sharp relief rally if the GDP number unexpectedly beats the low forecast.
Friday’s Canadian jobs report and UK retail sales data will offer important domestic insights but are likely to be overshadowed by the U.S. NFP release. We see the softness in Canada’s labour market, further evidenced by the recent widening of the trade deficit, as a cap on the Canadian dollar’s potential. Similarly, weakening UK consumer confidence suggests downside risk for sterling, making pairs like EUR/GBP interesting to watch for relative value.
