EUROPEAN SESSION

In the European session, we don’t have much on the agenda other than a couple of low-tier releases like the German factory orders or the Eurozone retail sales. The data won’t change anything for the ECB, so the market reaction will be muted.

As a reminder, the ECB is widely expected to increase interest rates at the upcoming meeting, but policymakers should also signal less appetite for further tightening. That means the bar for more rate hikes will go much higher.

AMERICAN SESSION

In the American session, we get Canada’s jobs report and the US NFP. Canada’s employment change in August is expected at 15K vs 75K prior, with the unemployment rate seen steady at 6.4%. The data is unlikely to influence Bank of Canada’s policy outlook, as the focus remains on inflation. Nevertheless, a very strong report could give the CAD a boost following the more hawkish than expected BoC rate decision.

As a reminder, the BoC kept interest rates unchanged as expected this week but has adopted a more hawkish than expected stance. In fact, the BoC removed the reference to the policy rate being “appropriate” and warned that upside risks to inflaiton have increased. Moreover, the central bank surprisingly downplayed the recent US tariffs. The CAD, of course, rallied strongly across the board after the decision.

The US NFP is expected at 55K vs -23K prior, with the unemployment rate remaining unchanged at 4.1%. Average hourly earnings y/y is expected at 3.1% vs 3.2% prior, while the m/m measure is seen at 0.3% vs 0.1% prior. The CPI will be more important given that it will decide whether the Fed hikes in September or stays pat at least another month.

This means that the market reaction will likely be limited if the US jobs data is in-line or a bit weaker/stronger than expected, as it won’t change anything for the Fed. We will likely need very strong/soft data to move the market meaningfully, as interest rate expectations get repriced.

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