Week Ahead: Eurozone CPI, RBNZ, BoC, and US Jobs Data

The week begins quietly on Monday, with no major scheduled economic events for the FX market. Tuesday sees the release of final manufacturing PMI readings from Japan, the Eurozone, the UK, and the US. Eurozone inflation data is also due on Tuesday.

On Wednesday, Australia's quarterly GDP data is released, followed by the RBNZ's monetary policy decision. The US will publish the ADP nonfarm employment change, and Canada's BoC will announce its monetary policy.

Thursday features final services PMI readings for the Eurozone, the UK, and the US, along with the US weekly jobless claims.

Friday wraps up the week with Canada's employment change and unemployment rate, and the US releasing average hourly earnings (month-over-month), nonfarm payrolls, and the unemployment rate. In the Eurozone, the consensus for the core CPI flash estimate year-over-year stands at 2.5%, matching the previous reading, while the headline CPI flash estimate is forecast at 3.3%, up from 2.5% previously.

Analysts note that inflation data from France and Spain came in stronger than anticipated, hinting that the overall Eurozone figures may also be elevated this week, which would support an additional rate increase at the ECB's September gathering.

Despite the rise in inflation in July, the ECB's projections for consumer inflation expectations one and three years ahead continued to decline.

The baseline scenario still calls for a 25-basis-point rate increase to 2.50%. Additional tightening is possible if price pressures spread, but Wells Fargo analysts see 2.50% as the terminal rate through 2027.

The RBNZ is anticipated to raise rates by 25 basis points at this week's meeting, continuing the tightening cycle that began in July. The bank is expected to maintain its forecast of a 3% official cash rate by year-end, though the timing of the subsequent move remains uncertain.

Economic indicators have generally aligned with the RBNZ's projections, but core inflation is still high within the bank's target range.

The Bank of Canada is predicted to keep rates steady on Wednesday, supported by robust economic growth, inflation close to its target, and a labor market that has been stabilizing recently.

Second-quarter GDP expanded at an annualized rate of 3.2%, and core inflation has remained near 2% since April. However, increased US tariffs and higher oil prices have added uncertainty to the economic outlook.

RBC analysts believe current tariff levels are not enough to disrupt the economic recovery, but further escalation might postpone the anticipated BoC rate increases in 2027 or even reintroduce the possibility of rate cuts.

For the US, the consensus estimate for average hourly earnings month-over-month is 0.3%, up from 0.1% previously. Nonfarm payrolls are expected to rise by 58,000, compared with a decline of 23,000 last month, while the unemployment rate is forecast to hold at 4.1%.

However, Wells Fargo analysts forecast a stronger rebound of 80,000 in August nonfarm payrolls after the weak prior reading, expecting reversals in some earlier declines in leisure and hospitality and state and local education employment. They also expect the unemployment rate to edge up to 4.2%, partly due to a normalization in labor force participation.

Other labor market signals suggest stabilization rather than further decline. Job openings have plateaued, small business hiring intentions have improved, and initial unemployment claims stay low. Overall, the report is anticipated to indicate modest job gains, limited layoffs, and a generally balanced labor market.

For Canada, the consensus for employment change is 15,800, down from 75,100 previously, with the unemployment rate seen unchanged at 6.4%. But RBC analysts estimate a much more modest gain of just 5,000 in August.

The unemployment rate dropped to 6.4% in July after strong summer job gains, while retirements and reduced immigration have constrained labor supply. Still, there is room for improvement as unemployment remains high by historical measures.

Online job postings showed little change in August, while broader economic indicators have improved since the winter slowdown. Renewed trade uncertainty poses risks, but for now the labor market is expected to gradually strengthen.