Week ahead: RBA decision, US jobs data, eurozone inflation

The week begins quietly on Monday with no major FX market events scheduled. Tuesday's key releases include the Reserve Bank of Australia's policy decision, Canadian monthly GDP, and US consumer confidence and JOLTS job openings data.

Wednesday brings Australian inflation figures after the RBA decision, along with US ADP employment, core PCE monthly, and the third estimate of Q2 GDP. Thursday features US weekly jobless claims and the ISM manufacturing PMI.

Friday rounds out the week with Tokyo core CPI, eurozone inflation, and the US monthly employment report including average hourly earnings, nonfarm payrolls, and the unemployment rate.

Several Federal Reserve officials are scheduled to speak during the week.

The RBA is anticipated to increase its cash rate by 25 basis points to 4.60% at this week's meeting, while keeping a hawkish stance due to ongoing inflation and a strong labour market. Governor Bullock has said that inflation risks are "materializing." That leaves the door open for more rate increases after September, though any further action will depend on incoming data.

Core inflation continues to run high; the trimmed mean measure is forecast to stay at 3.6% in August, above the RBA's year-end projection of 3.3%. Rising fuel and food costs are compounding price pressures, reflecting Australia's dependence on imported oil.

The jobs market also supports a tighter policy approach. Although the jobless rate increased to 4.6%, full-time employment has kept expanding, and the participation rate hit a record 67.1%. Robust hiring indicates that labour demand is still strong.

On balance, the RBA is likely to stress that inflation risks are still skewed to the upside, backing a tighter policy and possibly giving the Australian dollar a boost.

For Canada, the median forecast for monthly GDP is 0.1%, down from 0.3% previously. The economy lost steam in July; early indicators suggest flat or minimal growth after a robust second quarter. Manufacturing, wholesale trade and retail activity declined, though steady energy production and a housing rebound offered some offset.

Conditions brightened a bit later in the quarter, as hours worked and retail sales rose in August, according to RBC economists. Still, elevated US tariffs and persistent trade frictions are seen as clouding the growth outlook.

The Bank of Canada is watching these trends closely before its October meeting. Its base case is to hold rates steady for now, with a gradual tightening cycle projected to start in early 2027.

In Australia, the market expects monthly CPI to come in at 0.5%, down from 1.0%, while the trimmed mean monthly rate is seen at 0.3% versus 0.5% before. The annual CPI rate is projected to increase to 4.1% from 3.5%.

Westpac forecasts August CPI of 0.4% month-on-month, with a detailed estimate of 0.43%. Food and non-alcoholic beverages are predicted to add 0.2 percentage points, led by gains in bread and cereals, meat and seafood, and other food items.

This comes after a July reading that beat expectations, with consumer prices climbing 1.0%. That rise was above Westpac's 0.8% call and the 0.9% consensus, though the annual rate slowed from 3.8% to 3.5%. Since Westpac's detailed August estimate is a touch above its headline projection, the monthly figure has some upward risk.

In the United States, the median forecast for the core PCE price index monthly change is 0.3%, up from 0.2%. Personal income is seen rising 0.5% month-on-month versus 0.4% before, and personal spending is projected at 1.0%, compared with 0.2% previously.

The data due this week will give a wider view of the economy, with markets seeking signs of firmer consumer activity. The PCE release, the third Q2 GDP estimate, and annual revisions covering about five years will be published together, potentially altering the recent narrative on income, spending, savings, and inflation.

Methodological adjustments are anticipated to indicate a milder near-term inflation path, even with a stronger August number. However, Wells Fargo analysts predict the data will still reflect a robust US economy, with consumer spending and solid technology investment as key supports.

For the euro area, the median forecast for the core CPI flash annual rate is 2.5%, up from 2.4%, while the headline CPI flash is seen at 3.7% versus 3.2% previously. Attention will be on whether rising energy prices begin to lift services inflation.

September PMI data suggests ongoing resilience, with third-quarter growth estimated near 0.4%. Wells Fargo forecasts one last 25-basis-point rate increase from the ECB, bringing the deposit rate to 2.75%, though the outlook depends on incoming data.

For the US, average hourly earnings are forecast to rise 0.3% month-on-month, unchanged from the prior. Nonfarm payrolls are seen adding 98,000 jobs, down from 162,000. The unemployment rate is projected to hold at 4.1%, with the participation rate showing early signs of steadying.

The jobs market continues to look fairly balanced, underpinned by low initial claims, better job postings, and hiring activity still above last year's levels.

Wells Fargo economists project nonfarm payroll growth slowing to 90,000 in September, after August's upside surprise. Local government education employment may stay erratic following big swings in recent months.

Wage increases are seen staying modest, with average hourly earnings up 0.3% month-on-month and 3.2% year-on-year. That would keep labour cost growth fairly restrained and avoid adding to inflationary pressure.