Outlook for the Week of September 1 – 5

The week of September 1–5 will be crucial for global markets. In the U.S., attention will center on the August jobs report after July’s surprise weakness, alongside ISM PMIs for signs of tariff-driven price pressures. In Europe, preliminary eurozone CPI data will be key for gauging the ECB’s policy stance, while in Canada, employment figures will test the labor market following recent losses. In the Asia-Pacific region, Australian GDP and inflation data from China and Japan will provide fresh insight into growth and monetary policy prospects. With labor market concerns, inflation trends, and trade tensions in focus, the week promises significant market-moving potential.

Key Points to Watch

• U.S. employment data will be closely watched amid concerns about labor market weakness
• ISM PMIs may signal tariff-induced price pressures
• Preliminary eurozone CPI, Canadian employment, and Australian GDP will provide critical updates

Will the August Jobs Report Surprise Again?

It has been nearly a month since July’s payrolls release caused significant volatility and political controversy, as the figures contradicted President Trump’s narrative on the economy. The August report, due Friday, will carry considerable weight: will it show further deterioration in labor market conditions and reignite doubts about data reliability following Trump’s dismissal of the Bureau of Labor Statistics (BLS) director?

The real shock in July was not only the weak headline figure (73,000 versus 110,000 expected) but also sharp downward revisions to May and June, revealing that job creation had nearly stalled.

Although the unemployment rate remained stable last month—offering some relief to the Fed, often accused by Trump of acting “too late”—forecasts now point to a slight uptick in August, from 4.2% to 4.3%. Nonfarm payrolls are expected to remain subdued at 78,000, still well below the 100,000 threshold.

A continued weakening of the labor market would reinforce expectations of a September rate cut and could increase the likelihood of a third 25 bps reduction this year. At Jackson Hole, Fed Chair Jerome Powell noted that inflation risks remain tilted to the upside, while employment risks are skewed to the downside, acknowledging that the balance is shifting toward labor concerns. He also suggested that tighter immigration policies may be constraining labor supply, adding pressure to payrolls.

Given doubts about survey accuracy, the unemployment rate may serve as a more reliable indicator of labor market health. Any further disappointment could prompt renewed criticism from the president.

The U.S. Dollar Shows Resilience

Despite the initial sell-off following July’s employment report, the U.S. dollar has largely maintained its upward trajectory against major currencies. Unless August data reinforce expectations of deeper rate cuts, the Dollar Index is likely to extend its modest uptrend.

The ISM manufacturing and services PMIs, due Tuesday, September 2, and Thursday, September 4, could strengthen this view if tariff increases feed into further price pressures. Other key releases include industrial orders and the JOLTS job openings report (Wednesday, September 3). The ADP employment report has been delayed until Thursday, September 4, due to the Labor Day holiday. Meanwhile, any fresh tariff announcements from the White House could add volatility in this data-heavy week.

Canada Seeks Tariff Exemption

Canada remains under pressure after failing to secure an exemption from U.S. tariffs, which President Trump recently raised from 25% to 35%. Canadian Prime Minister Mark Carney announced that some retaliatory measures would be lifted on September 1 as a gesture of goodwill, raising hopes for a partial reduction in U.S. tariffs. This development could provide some support for the Canadian dollar.

Friday’s Canadian employment report (September 5) will also be closely monitored. The labor market shed nearly 41,000 jobs in July, and another decline could bring forward expectations of a Bank of Canada rate cut, currently anticipated in December.

Eurozone CPI Expected to Confirm ECB Pause

Eurozone inflation has hovered near the European Central Bank’s 2% target for nearly a year. The preliminary estimate for August, due Tuesday, September 2, is expected to remain at 2.0% year-on-year. Core inflation has held above 2.0%, while services CPI has shown signs of moderation.

The main concern remains wage growth, which unexpectedly rose to 4.0% year-on-year in Q2. While stronger growth has supported this trend, uncertainty over U.S. tariffs on European exports clouds the outlook. For now, the ECB appears positioned to maintain its pause, with limited reaction expected in the euro.

Additional eurozone data this week include producer prices (Wednesday, September 3), retail sales (Thursday, September 4), and employment and GDP figures (Friday, September 5). German industrial orders, also due Friday, could attract market attention. In the UK, July’s delayed retail sales report (Friday) will be the only significant release for the pound.

Conclusion

In the Asia-Pacific region, Chinese PMIs early in the week will shed light on the impact of U.S. tariffs on manufacturing activity. Both official and Caixin PMIs are expected to remain below 50, indicating contraction. Further deterioration would weigh on risk sentiment and the Australian dollar.

Australia’s Q2 GDP report, due Wednesday, September 3, is expected to show a pickup in growth after a weak Q1. However, with inflation rising, implications for Reserve Bank of Australia (RBA) policy could be limited.

In Japan, Monday’s capital expenditure data will indicate whether Q2 GDP is likely to be revised. Additional reports on household spending and income (Friday, September 5) will also be closely watched, as stronger wage growth could reinforce expectations of a possible year-end rate hike by the Bank of Japan.

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