This week will see limited economic events following the recent U.S. non-farm employment change data. In the U.S., the ISM services PMI is anticipated at 50.2, a slight decline from 50.8, with the services sector remaining above the expansion threshold.

New Zealand’s employment change and unemployment rate data will publish on Wednesday, coinciding with the Federal Open Market Committee’s monetary policy announcement. Thursday brings the Bank of England’s policy decision, while the U.S. will release its unemployment claims report. Canada will follow with its employment change and unemployment figures on Friday.

Tariff Impact on Ism Services Pmi

The ISM services PMI release is an opportunity to observe the tariff impact. A prior drop was driven by declines in employment, domestic, and international orders. Despite business activity holding, declining confidence could further affect the sector. Regional Fed surveys have reported weakening service activity due to uncertainty in investment and supply chains.

The Fed is expected to maintain rates despite weak economic indicators, particularly Q1 GDP. The labour market is stable, yet concerns linger around rising input costs, declining equity markets, and wider credit spreads. Analysts predict rate cuts could begin in June if tariffs significantly affect economic data.

The Bank of England might cut rates by 25 basis points, continuing a cycle of quarterly cuts. Canadian employment faces strain, with anticipated employment changes at 24.5K and the unemployment rate steady at 6.7%. Employment declined, and participation dropped, indicating possible future deterioration.

Global Market Sentiment

The current stretch of limited economic events offers a brief pause following the more decisive U.S. employment data. The ISM services PMI, drifting slightly lower yet holding its head above the neutral 50 mark, suggests activity among service providers is slowing, but not reversing altogether. Previous declines in employment components, alongside softer domestic and foreign orders, painted a picture of businesses starting to grow cautious. Underneath that, regions have reported retreating service activity, pointing to real effects from lingering tariff arrangements, as well as general supply-side hesitancy. So while overall business output has been steady, there’s a visible inward shift in sentiment.

The Federal Reserve, heading into its policy meeting, is widely expected to leave rates untouched. We’ve seen the economy post weaker Q1 GDP, yet this alone doesn’t seem to meet the bar for a policy shift. Instead, the Fed appears focused on how broad-based the cost pressures will become. Rising credit costs and wider credit spreads are tightening access to money—an indirect form of restraint. When the central bank sees ample proof that tariffs are squeezing more than just sentiment—that they’re dragging on hiring and consumption—we could then see the early stages of easing. Not pre-emptively, and likely not before June.

In the UK, the Bank of England’s direction hinges heavily on domestic data, though recent commentary suggests comfort in a slow but deliberate pace of adjustment. A 25-basis-point cut would provide a calculated signal—not of emergency, but of fine-tuning as inflation metrics continue to come down and core consumer activity shows signs of stabilising. This methodical path, taking in quarterly assessments, would reflect their caution rather than haste. Markets have now largely baked this into their expectations.

Meanwhile, in Canada, labour data is due to land on Friday. The forecast for jobs created sits above zero, but only just. Last month, not only did employment fall, but participation shrank—a red flag. That suggests people may be losing confidence in finding work or deciding it’s no longer worth seeking. This pattern doesn’t correct itself overnight, and if confirmed by this week’s data, it could prompt reappraisals on the strength of the Canadian consumer. Employment often moves with a lag, so softening trends now could mean lower wage and spending pressures later on.

From our point of view, where interest rate expectations are moving becomes clearer when looking at credit metrics and equity shifts rather than surface indicators. There’s a growing wedge between softening economic figures and firm policy stances across the developed markets. When central banks start to respond, they’ll do so not because they want to reassure markets, but because the data leaves little room for inaction. That’s where attention should remain—in trying to read what scenario policymakers can no longer dismiss.

In this environment, the challenge is not volatility—it’s timing. When labour data, service sector health, and forward-looking sentiment all start turning in the same direction, that moves expectations ahead of formal decisions. The goal is staying one step ahead without getting drawn into reactive positioning driven purely by calendar events.

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