Monday starts off quietly with no significant scheduled economic events, but the FX market will watch for any new developments regarding the conflict in the Middle East.
On Tuesday, the focus will be on the RBA monetary policy announcement in Australia, while in the U.S., key releases will include the ISM services PMI, JOLTS job openings and two new home sales prints as last month’s publication was skipped due to the U.S. government shutdown.
New Zealand will report employment change q/q and the unemployment rate on Wednesday and the U.S. will release unemployment claims data the following day. Also on Thursday, the U.K. will hold local elections, which could provide a glimpse into the changing political landscape and future challenges for the governing Labor party.
On Friday, Canada will publish its employment change figures and the unemployment rate, while the U.S. will release its average hourly earnings m/m, non-farm employment change, and the unemployment rate, along with preliminary UoM consumer sentiment and inflation expectations.
Several FOMC members are expected to deliver remarks throughout the week.
At this week’s RBA meeting, a 25 bps rate hike is expected, which would take the cash rate to 4.35%. This would be in line with market expectations and near the upper end of the forecast range.
One of the main drivers of this move is the Q1 inflation data, which came in above expectations. In addition, ongoing geopolitical tensions have contributed to rising fuel costs, putting further pressure on the economy and suggesting a stronger and faster price pass-through than initially anticipated.
Westpac analysts note that the RBA’s communication has not pushed back against the market’s repricing toward further hikes, indicating a degree of alignment with tightening expectations. For this meeting, traders will closely monitor any updated staff projections, which should provide greater clarity on the central bank’s assessment of inflation dynamics related to geopolitical developments.
Although inflation appeared to be moderating before the Middle East conflict, there’s a risk of reacceleration. Recent indicators, such as a sharp increase in business input costs according to April surveys suggest that price pressures are picking up again. Combined with a still-tight labor market and relatively resilient economic conditions, this supports the case for near-term policy action, Wells Fargo said.
Analysts also argue that additional rate hikes may be on the table in the near term, with the possibility that the cash rate could reach around 4.60% if inflation proves more persistent.
In New Zealand, the consensus for employment change q/q is 0.3%, compared to the prior 0.5%, while the unemployment rate is expected to remain unchanged at 5.4%.
Even though data points to a slight increase in hiring recently, this appears to be keeping pace with working-age population growth rather than exceeding it, Westpac analysts said.
There may be some noise in the employment figures, as the previous quarter’s relatively strong gain is likely to be revised lower. However, this does not materially change the broader picture. The unemployment rate is considered a more reliable gauge in this environment, as it tends to be less affected by survey volatility.
Overall, the labor market continues to show signs of slack, which is expected to keep wage pressures contained. As a result, private sector labor cost growth is projected to ease slightly, reinforcing the view that inflationary pressure from wages remains limited for now.
In Canada, the consensus for employment change is 5.1K, compared to the prior 14.1K, while the unemployment rate is expected to remain unchanged at 6.7%.
RBC analysts expect Canada’s April jobs report to show a more significant improvement with around 25K positions added following a weak start to the year. Overall employment would still be slightly lower year-to-date, although a slower-growing labor force could help nudge the unemployment rate down to 6.6%.
The underlying picture appears less weak than headline job numbers suggest. Weakness has been concentrated in trade-sensitive sectors, while the rest of the economy has held up relatively well. At the same time, recent job losses have been driven more by temporary factors rather than permanent layoffs, and broader measures of unemployment do not indicate hidden deterioration.
With labor supply growth easing due to immigration limits and demographic factors, fewer job gains are now needed to improve per-worker conditions. While the labor market is not particularly strong, business sentiment is improving, and the outlook points to a gradual decline in unemployment toward 6.3% by year-end.
In the U.S., the consensus for average hourly earnings m/m is 0.3%, compared to the prior 0.2%. Non-farm employment is expected to increase by 60K versus the previous 178K, while the unemployment rate is projected to remain unchanged at 4.3%.
The U.S. labor market continues to show a subdued pace, with both limited hiring and layoffs. Although there has been significant attention on job cuts in the tech sector, broader indicators suggest that layoffs across the economy remain contained.
At the same time, businesses appear hesitant to expand their workforce, with hiring intentions weakening and job postings losing momentum after earlier gains. With labor demand largely steady, supply constraints driven by demographics and lower immigration are becoming more influential in shaping job growth.
Following a stronger March increase in payrolls, Wells Fargo expects a slowdown in April, with job gains projected to come in at around 70K. Analysts also predict the unemployment rate will edge higher to about 4.4% as more individuals join the labor force
