• US ISM and jobs data to keep September hike live, USD firm.

• BOC & BNM to hold. RBNZ to hike again. BOI to keep easing.

• Eurozone inflation to warm up, Swiss inflation to stay cool.

Fed Chair Kevin Warsh added his name to the Jackson Hole symposium’s history of policy turning points. Warsh threw a hawkish curve ball on Friday, sending USD and short-term Treasury yields soaring. Warsh questioned whether underlying inflation “is moving to our [2%] objective, clearly and at sufficient speed,” signaling the Fed may still have more work to do.

Warsh welcomed this summer’s better than expected PCE and CPI readings but cautioned “they do not tell me that underlying trends have meaningfully improved.” Warsh noted that over the past 12 months, 54% of goods and services in the PCE basket showed price increases above 3%, well above the level of 32% in the two decades that preceded the pandemic.

Warsh also downplayed moderating wage growth given that it “has not proven a reliable indicator of future inflation for a very long time” and warned that rising commodity prices could add to upside inflation risks. Speeches by Fed governors Michael Barr (Tuesday) and Christopher Waller (Thursday) will show if Warsh’s hawkish message has broader FOMC support.

Fed funds futures now price in 60% odds (up from 35% before Warsh’s speech) of a 25bps hike for September 16 and imply 60bps of tightening over the next twelve months. Pricing will remain elevated into the September meeting, with the August CPI on September 11 the decisive test. Until then, this week’s US August ISM and jobs data should keep a September hike firmly in play and underpin USD.

Stable US Labor Market

Nonfarm payrolls (NFP) are expected to recover in August (Friday). Consensus is looking for NFP gains of +55k vs. -23k in July, consistent with the modest improvement in weekly ADP private sector payrolls. The unemployment rate is expected to remain at 4.1% for a second consecutive month, tracking below the FOMC 2026 projection of 4.3%. Job creation may be low, but weak labor supply growth and historically low layoffs point to an economy near full employment.

July JOLTS report (Tuesday) should reinforce the US labor market’s low hire, low fire backdrop. August ADP private payrolls (Wednesday) are seen at +47k vs. +44k in July. There is no consensus estimate for August Revelio Labs employment (Thursday), but in July it showed the economy added +79.2k jobs, when NFP lost -23k jobs. According to Revelio Labs, its employment data has a 0.74 correlation coefficient with the NFP survey.

August Manufacturing ISM (Tuesday) and the Services ISM (Thursday) surveys will be closely watched. Their prices paid subindexes will offer clues on whether upside inflation risks are building or fading. July sent a mixed signal, with services price pressure heating up and manufacturing price pressure easing slightly.

Similarly, the July Fed Beige book also pointed to a mixed inflation outlook. Contacts in some Districts expected “inflation to continue at its current pace, while contacts in others expected inflation to slow, in part due to falling fuel prices.” The next Beige Book is due on Wednesday.

BOC on Ice

The Bank of Canada (BOC) is widely expected to keep the policy rate on hold at 2.25% for a seventh consecutive meeting (Wednesday). The worsening US-Canada trade war threatens to derail Canada’s Q2 growth pick-up. Encouragingly, core inflation near 2% gives the BOC room to stand pat and cushion economic activity.

As such, market pricing 75bps of BOC hikes in the next twelve months look too aggressive, leaving scope for a dovish repricing and USD/CAD higher near 1.4000. Remember, the BOC highlighted at its April 29 meeting, that “if the United States imposes significant new trade restrictions on Canada, we may need to cut the policy rate further to support economic growth.”

Nevertheless, Canada’s favorable labor market condition argues against a rate cut. Canada’s August labor force survey is due on Friday, and the economy is expected to add +15.0k jobs vs. +75.1k in July with the unemployment rate holding at a two-year low of 6.4%.

RBNZ on Fire

The RBNZ is widely expected to deliver a back-to-back 25bps Official Cash Rate (OCR) hike to 2.75% (Wednesday). New Zealand headline inflation is above target, and the domestic growth outlook has improved. We also anticipate the RBNZ to reiterate that “further OCR increases appear likely at upcoming meetings” because the OCR remains well within the bank’s neutral range estimate (2.20%-4.10%).

Nonetheless, we expect the RBNZ updated OCR path to track below market pricing which limits NZD upside. New Zealand inflation expectations are anchored around 2% and rising unemployment points to excess labor supply. The swaps curve implies the OCR at 3.75% in the next two years, above the RBNZ’s May projection of a 3.25% peak in Q3 2028.

August CPI Check

Eurozone August preliminary CPI inflation expected to quicken (Tuesday). Headline CPI is forecast at 3.3% y/y vs. 2.9% in July on higher energy prices, while core CPI should hold at 2.5% y/y for a second straight month. Above target inflation and a firmer growth outlook give the ECB scope to normalize the policy rate towards the upper end of its estimated 1.75% to 3.00% neutral range.

The swaps curve has virtually fully priced in a 25bps ECB rate hike to 2.50% on September 10 and a total of 60bps of tightening over the next twelve months. That’s EUR/USD supportive and makes fresh cyclical lows below 1.1400 unlikely.

Switzerland August CPI to remain muted (Thursday). Headline CPI is expected at 0.5% y/y vs. 0.4% in June, tracking slightly below the Swiss National Bank’s (SNB) forecast of 0.6% y/y in Q3. Core CPI is expected at 0.3% y/y for a fifth straight month. Bottom line: the SNB has plenty of room to keep rates at 0.00% for some time, which is an ongoing drag for CHF. CHF is the worst performing G10 currency so far this quarter.

BOI to Keep Easing

Bank of Israel (BOI) is expected to deliver a third straight 25bps rate cut to 3.25% (Tuesday). However, it’s a close call with analysts evenly split. Our base case is a cut because Israel headline CPI inflation has been running just below the midpoint of the bank’s 1-3% target range since January. Regardless, the AI/data-center spending boom should continue to fuel capital inflows into Israel’s large tech sector (roughly 20% of the GDP) and support the uptrend in ILS.

BNM to Stay Put

Bank Negara Malaysia (BNM) is expected to leave the policy rate on hold at 2.75% for a seventh consecutive meeting (Thursday). BNM is also poised to maintain its neutral bias, reiterating it considers “the monetary policy stance to be appropriate and consistent with the outlook of continued price stability and sustainable economic growth.” Malaysia’s positive real rates should keep MYR an Asian FX leader.

Growth Check

Australia Q2 real GDP (Tuesday) won’t shift the dial on RBA rate hike expectations, with policymakers more focused on upside inflation risks. Real GDP is expected at 0.3% q/q vs. 0.3% in Q1 and 1.8% y/y which would be close to the RBA’s June forecast of 1.9% y/y. Importantly, Australia’s attractive carry alongside the country’s strategic exposure to commodities linked to energy, AI, and defense remain key AUD tailwinds.

China’s official August PMIs (Monday) are expected to remain indicative of a soggy growth outlook. Still, USD/CNH downtrend is intact in our view reflecting both China’s internal rebalancing story and CNH internationalization potential.