Monday begins quietly, with no significant events scheduled for the FX market, though geopolitical developments in the Middle East could influence USD movements.
On Tuesday, Australia will release the Westpac consumer sentiment index, Japan will publish final GDP q/q, and the U.S. will report the ADP weekly employment change. While this release is usually not market-moving, it may attract more attention following the latest disappointing jobs report.
On Wednesday, the focus will shift to U.S. inflation data and on Thursday, Bank of England Governor Andrew Bailey is scheduled to speak at the Financial Stability Board Payments Summit in London. The U.S. will also release weekly unemployment claims figures.
Friday will be busy. The U.K. will publish GDP m/m, Canada will release employment change and the unemployment rate, and the U.S. will report several key indicators, including the core PCE price index m/m, preliminary GDP q/q, durable goods orders m/m, JOLTS job openings, preliminary UoM consumer sentiment, and preliminary inflation expectations.
Also keep in mind the daylight saving time shift in both Canada and the U.S. during the week.
In Japan, the consensus for final GDP q/q is 0.3% versus 0.1% previously. Fourth-quarter GDP figures are expected to be revised higher, supported by stronger income data and business investment.
According to ING analysts, an increase in winter bonus payments will be reflected in labor cash earnings while real cash earnings are also likely to return to positive territory due to the recent moderation in inflation, improving household purchasing power.
On Friday, the U.S. jobs report came in below expectations and was a significant disappointment, marking the largest drop since October, when the data was also revised lower.
The unemployment rate rose to 4.4% from 4.3%, reflecting softer hiring conditions. Manufacturing has begun cutting jobs, and outside of healthcare, which drove much of the hiring momentum in recent years, few sectors are showing meaningful strength.
Some of February’s weakness may prove temporary, particularly following a healthcare strike that reduced payrolls by about 28,000 workers, Axios noted. Even so, the broader trend points to a labor market losing momentum, with employers adding only 6,000 jobs per month on average in an economy of roughly 158 million workers.
The softer labor data comes alongside weaker consumer spending and rising uncertainty related to tariffs, energy prices, and geopolitical tensions, adding another layer of risk to the U.S. economic outlook. Fed’s Miran noted that he is hesitant to read too much into a single month’s job report.
In this context, the weekly ADP may provide some insight on whether hiring momentum continues to cool or if the February weakness was temporary, considering the blockbuster jobs report from January.
In the U.S., the consensus for core CPI m/m is 0.2% versus 0.3% previously. Headline CPI m/m is expected to rise 0.3% compared with 0.2% prior, while CPI y/y is forecast to increase from 2.4% to 2.5%. Some analysts expect U.S. inflation to print above expectations, which could further reduce market bets on near-term rate cuts.
Expectations for Fed easing have already shifted, with ING pricing around 40 bps of cuts compared with 60 bps before the recent military operations involving Iran. Combined with the weaker-than-expected jobs report, analysts have pushed their expected timing for rate cuts from June and September to September and December.
Higher energy prices are also adding to inflationary pressures in the short term, though the full impact is more likely to appear in the March CPI data. For this week’s release, attention will focus more on tariff-related pressures on goods prices, which could keep inflation elevated.
In the U.K., the consensus for GDP m/m is 0.2% vs. 0.1% previously. Analysts at Wells Fargo expect a slightly stronger increase of around 0.3%, arguing that growth is likely to span industry, services, and construction, with both economic activity indicators and January PMIs pointing to a positive start to the year.
While services continue to dominate the economy, rising manufacturing activity is also contributing to the momentum. From a monetary policy perspective, the BoE is expected to continue cutting rates over time, though there is a strong likelihood that policymakers will keep rates on hold at the next meeting.
Policymakers are also likely to remain cautious due to the renewed conflict in the Middle East, which could push energy prices higher and, if sustained, place additional pressure on economic growth.
In Canada the consensus for the employment change is 11.1K vs prior -24.8K and the unemployment rate is expected to rise from 6.5% to 6.6%. Analysts from RBC expect a 6.7% rise in the unemployment rate and they stressed that this is likely due to a partial rebound in the labor force participation rate after an unusually large drop in January.
That month saw a 25,000 fall in jobs alongside a 119,000 decline in the labour force, driven by slower population growth and the largest participation drop (-0.4 percentage points) since January 2022.
Although it may seem unusual for both employment and the unemployment rate to fall at the same time, historical data shows this has occurred 13 times since 2000, usually in stable or improving labour markets rather than slowdowns.
With slower population growth from caps on temporary resident arrivals, this dynamic could become more common, as a smaller labour force reduces the number of new jobs needed to lower unemployment.
The expected rise in the unemployment rate for February would only partially reverse January’s drop, keeping the overall downward trend intact from the recent peak of 7.1% in September. Wage growth data will also be monitored closely, with average hourly earnings showing continued moderation, consistent with other survey results.
In the U.S., the consensus for the core PCE price index m/m is 0.4%, same as the prior month. Personal income is expected to rise 0.4% m/m vs. 0.3% previously, while personal spending is forecast to increase 0.3% m/m compared with 0.4% prior.
January’s personal income and spending report is expected to show that consumers are still holding up reasonably well despite lingering uncertainty and softer confidence. Wells Fargo projects personal income to rise around 0.5%, supported by steady wage growth and annual Social Security adjustments, while personal spending is expected to increase about 0.4%, driven largely by continued strength in services even as discretionary spending remains subdued.
Inflation, however, continues to weigh on households. Real disposable income growth is likely to lag real consumption growth, suggesting that consumer support has weakened somewhat. Looking ahead, favorable tax provisions from the One Big Beautiful Bill Act are expected to boost household income this spring and help sustain consumption in the coming months.
This article was written by Gina Constantin at investinglive.com.
