• US data to shed light on employment, inflation, and consumer spending.

• Canada jobs data the focus. Soft print unlikely to curb BOC rate rise expectations.

• Australia Q3 GDP to support RBA rate hike narrative.

USD pulled backed last week from multi-month highs as US economic data underscored the case for a Fed funds rate cut on December 10 (83% price-in). The data showed weak labor demand, emerging cracks in consumer spending, and fading upside inflation risks.

The Macro Domino: ISM, ADP, PCE, UofM

We expect USD to consolidate in the near term. But narrowing US-G6 rate differentials suggests the path of least resistance for USD is down. Fed policy is still restrictive and leaves scope for the Fed to deliver more easing. In contrast, most other major central banks have reached neutral policy settings and signaled an end to their easing cycle.

This week’s US economic data will provide further insights into the employment, inflation, and consumer-spending backdrop:

November ISM manufacturing (Monday). The headline index is projected at 49.0 vs. 48.7 in October, consistent with a slower contraction in manufacturing activity. Watch the prices paid and employment sub-indexes for signs that inflation risks keep receding and job losses moderating.

November ADP employment change (Wednesday). Consensus expects ADP payrolls at 10k vs. 42k in October. For reference, the ADP weekly employment preliminary estimate showed private employers shed an average of -13,500 jobs a week for the four weeks ending November 8.

November ISM services (Wednesday). The headline index is projected at 52.0 vs. 52.4 in October, indicative of resilient services activity. Watch the prices paid and employment sub-indexes for signs that inflation risks are receding and job losses moderating.

November Challenger jobs report (Thursday). In the year to October, job cuts totaled nearly 1.1 million, the highest cumulative total since 2020, while hiring plans totaled 488k, the lowest cumulative total since 2011.

September Personal Consumption Expenditure (PCE) (Friday). Headline and core PCE deflators are both expected at 2.8% y/y vs. 2.7% and 2.9% in August, respectively. Attention will also be on the PCE non-housing services inflation as it is still running at a rate above what has been historically consistent with 2% inflation.

Meanwhile, real personal spending is expected at 0.1% m/m vs. 0.4% in August. Rising job insecurity is likely to push households toward higher savings, retraining any meaningful pick-up in consumer spending.

December University of Michigan sentiment index (Friday). Headline is expected at 52.0 vs. 51 in November, well below the long run average at 84.4. Watch the measures of inflation expectations to confirm that price pressures remain contained.

Another Maple Jobs Miracle?

Canada’s November labor force survey is the domestic highlight (Friday). The economy is expected to lose -5k jobs in November after surprising with strong gains of 66.6k and 60.4k in October and September, respectively. The Q3 business outlook survey indicates subdued hiring intentions over the next 12 months.

So long as labor weakness doesn’t deepen or widen, the Bank of Canada (BOC) is finished cutting. The swaps market implies steady rates at 2.25% over the next twelve months and a 25bps hike to 2.50% in the next two years. USD/CAD needs to sustain a break below its 200-day moving average (1.3923) to gain downside traction. In the meantime, the double-top around 1.4150 offers good resistance.

CPI Trifecta on Deck

Eurozone, Switzerland and Sweden November CPI are due Tuesday, Wednesday, and Thursday, respectively. The data is unlikely to shift interest rate expectations and should have little effect on currency markets.

Eurozone headline and core CPI are seen unchanged at 2.1% y/y and 2.4% y/y for a second straight month in November, matching the ECB’s 2025 projection. The ECB is in a good place to keep rates on hold at 2.00% for some time. EUR/USD appears to have carved out a bottom around 1.1500, with next key resistance at 1.1644, the 100-day moving average.

Switzerland headline and core CPI are seen unchanged at 0.1% y/y and 0.5% y/y for a second straight month in November. If so, headline inflation would be tracking well below the Swiss National Bank’s (SNB) forecast of 0.4% y/y over Q4. Still, the bar is high for the SNB to cut the policy rate below the current level of 0.00%. USD/CHF likely to stay within a 0.7900-0.8100 range in the short-term.

Sweden’s policy-relevant CPIF is expected at 2.4% y/y (Riksbank forecast: 2.1%) vs. 3.1% in October while CPIF ex-energy is projected at 2.6% y/y (Riksbank forecast: 2.5%) vs. 2.8% in October. Sticky inflation backs the Riksbank’s forecast that the policy rate will remain at 1.75% until Q3/Q4 2026. The swaps market implies odds of a rate hike in the next twelve months which bodes well for SEK.

Australia Economic Check

Australia Q3 GDP is the focus (Tuesday). Real GDP is expected at 0.7% q/q vs. 0.6% in Q2 driven by continued growth in household consumption. On a year-over-year basis, real GDP is seen at 2.2% vs. 1.8% in Q2, tracking slightly above the RBA’s Q4 projection of 2% and signaling firmer underlying capacity pressures.

The swaps curve is betting on RBA rate hikes over the next year, in sharp contrast to the nearly 100bps of easing priced for the Fed. As such, AUD/USD has scope to converge with one-year implied policy rate differentials and trade closer to 0.6700.

Chinese Growth Slumps

China’s official headline PMI fell in November to near a three-year low at 49.7 vs. 50.0 in October, indicative of worsening economic activity. The details showed the manufacturing PMI recovered less than expected to 49.2 (consensus: 49.4) vs. 49.0 in October, while the non-manufacturing PMI unexpectedly dropped to 49.5 (consensus: 50.0) vs. 50.1 in October. The private-sector RatingDog November PMIs are due this week.

Overall, to address its soggy growth outlook, China must shift its growth model toward one in which domestic consumption plays a greater role. In our view, a continued appreciation in China’s currency could help stimulate consumer spending by boosting disposable income through cheaper imports. Bottom line: USD/CNH downtrend is intact.

Beyond the Majors

National Bank of Poland (NBP) is expected to deliver a fifth consecutive 25bps policy rate cut to 4.00% (Wednesday). Poland headline and core CPI inflation are undershooting the NBP’s 2025 forecast of 3.7% and 3.3%, leaving room for additional easing.

In the next twelve months, the swaps curve more than fully price in NBP to slash rates by 50bps to 3.75%. In contrast, the one-year swaps curve price-in the Czech National Bank (CNB) to raise rates 50bps to 4.00%. Bottom line: monetary policy divergence points to a lower PLN/CZK.

The Reserve Bank of India (RBI) is expected to cut the policy rate 25bps cut to 5.25% after two straight meetings on hold (Thursday). At its last October 1 policy decision, the RBI noted “The current macroeconomic conditions and the outlook has opened up policy space for further supporting growth.” Indeed, India core inflation has been largely stable around the mid-point of the RBI's 2%-6% target range for several months and tariff related developments are likely to decelerate growth in the coming quarters. The swaps curve fully price in a final 25bps of cuts in the next three months.