Monday sets off with a relatively light calendar, marked by a holiday in Japan in observance of Showa Day, which kicks off the Golden Week celebrations. In the eurozone, attention will be on the release of inflation data followed by the GDP on Tuesday.
Also Tuesday, Canada will get the GDP m/m and the employment cost index q/q. In the United States, key indicators include the Chicago PMI and the CB consumer confidence index.
Wednesday brings notable events for New Zealand, with the release of employment change q/q, unemployment rate, and labor cost index q/q. Europe will observe Labor Day.
In the United States on Wednesday, market participants will closely watch the release of the ADP non-farm employment change, final manufacturing PMI, ISM manufacturing PMI, JOLTS job openings, and the highly anticipated FOMC meeting.
BoC Governor Tiff Macklem and Deputy Governor Carolyn Rogers are scheduled to testify before the Standing Senate Committee on Banking, Commerce, and the Economy in Ottawa.
Thursday brings the release of inflation data in Switzerland and weekly unemployment claims data in the United States.
Finally, on Friday, attention shifts to the U.S. once again, with the release of average hourly earnings m/m, non-farm employment change, unemployment rate, the final services PMI and the ISM services PMI.
On Monday the eurozone will get the inflation data followed by the GDP on Tuesday. These prints are expected to keep the ECB on track to deliver the first 25bps rate cut in June. Lately, inflation in the eurozone has dropped and this week’s data will likely show a continuation of that trend, although price pressures still remain, particularly in the services sector. The core CPI made significant progress towards the ECB's 2% target.
The consensus is for the headline inflation to print around 2.4% and core inflation to come in at 2.7%. The data can influence the pace and the timing of potential rate cuts if it deviates too much from expectations. The ECB is expected to take a break after the rate cut in June, but unexpected data could push for back-to-back cuts.
The GDP releases are anticipated to reflect that the economy is improving slightly. The consensus for the GDP q/q is 0.1% and for y/y is 0.2%.
In New Zealand the employment change forecast for the q/q print is 0.3% vs prior 0.4%, while the unemployment rate is expected to rise from 4.0% to 4.3%. The labor cost index is anticipated to print at 0.8% vs prior 1.0%.
Even if the unemployment rate will rise to 4.3%, it would still remain within historical lows territory, but higher than the 3.2% recorded two years ago. According to analysts from Westpac, persistent high levels of net migration are fueling robust population expansion, which in turn is bolstering both labor supply and demand.
However, the elevated interest rates are having a dampening effect on economic activity and while employment continues to increase at a modest pace, it is not sufficient to accommodate the labor force expansion.
In the U.S. the consensus for the final manufacturing PMI is to remain unchanged at 49.9; the ISM manufacturing PMI is expected to drop from 50.3 to 50.1 and the ISM manufacturing prices are likely to drop from 55.8 to 55.6.
The U.S. economic data surprised to the upside lately reflecting the resilience of the economy. The ISM manufacturing index printed below the 50 level for 16 consecutive months signaling contraction in the sector. However, in March it rebounded back to above 50, breaking the cycle.
Analysts at Wells Fargo stressed that manufacturing data has not been consistent with the stellar growth in the service economy for the past year and a half. This week's data will show if the manufacturing sector is on its way to recovery.
The FOMC meeting is the most awaited event of the week. After the latest economic data the market is not expecting rate cuts from the Fed any time soon with market participants now believing a first cut will come in December. However, until then many things can happen.
At this week's meeting it is widely expected that the Fed will keep the federal funds rate unchanged. All eyes will be on what Powell will have to say, but it is very likely that he will reiterate that future decisions are data dependent.
The consensus for the Swiss CPI m/m data is a rise by 0.1%. Last month the Swiss CPI y/y printed at 1.0% which is below the SNB's target of 2.0%. In Switzerland the inflation is expected to remain in this 0-2% range for some time with SNB's Martin and Moser noting that "our latest forecast indicates that inflation is likely to remain within the price stability range over the next three years, even taking into account the recent interest-rate cut."
In the U.S. the consensus is for the average hourly earnings to rise by 0.3%, same as last month. The non-farm employment change is expected to drop from 303K to 243K and the unemployment rate is likely to remain unchanged at 3.8%.
Since the beginning of the year the expectations have been that the labor market will soften, but the data surprised to the upside. However, there have been some signs of cooling down especially with a reduction in job postings from small companies and layoffs continuing to occur.
