French and German inflation rates, Canadian GDP, US PCE, US ECI, and US Jobless Claims are important economic indicators. In the European session, we will see Swiss Retail Sales, French CPI, and German inflation, with no changes expected from the SNB or ECB. Market expectations for a rate cut before the end of the year are decreasing. In the American session, Canadian GDP is not expected to have an impact since the Bank of Canada is holding rates steady. The chance of a rate cut by the end of the year is around 50%. The US PCE price index is expected to be 2.5% year-over-year, with Core PCE at 2.7% year-over-year. Both figures are seen as predictable based on earlier CPI and PPI data.

US Employment Cost Index and Jobless Claims

The US Employment Cost Index for Q2 is forecasted at 0.8%. The Fed tracks this for signs of wage growth, but it often lags behind the economy. US Jobless Claims indicate a “low firing, low hiring” trend due to tariff uncertainties. Initial Claims are expected to be 224K, up from 217K, while Continuing Claims remain steady at 1,955K. These indicators will shape market sentiment and future monetary policy. As the Federal Reserve holds back on signaling a rate cut in September, the next few weeks will hinge on US data. The market is adjusting expectations with each new release, rather than waiting for the complete data set the Fed is looking for. Attention is focused on the next two Non-Farm Payroll and CPI reports ahead of the Fed’s meeting. The upcoming US PCE data, projected with a core reading of 2.7%, is not anticipated to be shocking since it is mainly based on previous inflation reports. However, Core PCE has been stubbornly above 2.8% for the first half of 2025, so any deviation from this prediction will be monitored closely. This is exactly why the Fed is hesitant to act without strong evidence of a slowdown.

US Labor Market Data

The US labor market data is where the real concerns are. After a weaker NFP figure for June 2025 of about 175K, all eyes are on tomorrow’s report and another in September. Weekly jobless claims have remained within a tight range of 215K to 230K for months, indicating a market that is neither aggressively hiring nor firing. With the Fed’s next steps uncertain, traders in derivatives should brace for increased volatility. Strategies such as buying straddles or strangles on major indices like the S&P 500 or rate-sensitive ETFs could be effective. These positions can profit from significant market movements in either direction following the crucial US jobs and inflation data. Meanwhile, European and Canadian markets present fewer immediate opportunities, as their central banks appear to be on a steadier path. The European Central Bank has indicated a strong pause after its one rate cut in March 2025. This makes currency pairs like EUR/USD more reliant on how the US dollar reacts to its own domestic information. Create your live VT Markets account and start trading now.

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