Market Outlook for the week of 7th- 11th July

At this week’s RBA meeting, the consensus is for a 25 bps rate cut, bringing the cash rate down to 3.60% from 3.85%.

Recent inflation data in Australia came in lower than expected at 2.1 y/y, printing just above the Bank’s 2% target and below its own forecasts. While this is an encouraging sign, underlying inflation pressures remain a concern for the Bank, Westpac analysts said.

Economic growth has also been subdued with Q1 GDP printing at just 0.2% quarter-over-quarter, so traders will be closely watching for any clues about future policy decisions and potential shifts in the Bank’s language. Some analysts even believe the RBA could choose to keep rates unchanged at this meeting.

The RBNZ is expected to keep its monetary policy unchanged at 3.25% at this week’s meeting. The Bank is likely to maintain a dovish stance for now and may avoid offering clear signals on the timing of future rate cuts.

According to analysts from Westpac, the RBNZ will likely reiterate that policy decisions remain data-dependent, leaving upcoming economic indicators to shape market expectations ahead of the August meeting. Markets are split on whether a move to 3.00% could come as early as August, be delayed, or potentially not occur at all.

In the U.S., jobless claims continue to provide a clear indication of the labor market’s gradual cooling. While layoffs remain relatively low, a steady rise in continuing claims suggests it’s taking longer for the unemployed to find new jobs.

The four-week average for initial claims stands at 242K which is still low, but 2% above last year’s level, while unemployment durations are also creeping higher with a median of 10 weeks.

Although the labor market hasn’t reached a critical point, Wells Fargo analysts caution that a sharper increase in claims could signal deeper challenges ahead. For now, payroll growth is expected to slow as trade pressures raise business costs and dampen demand.

For Canada there is no analyst consensus for the employment change and unemployment rate at the time of writing. The country’s labour market has shown marked deterioration this year, with the unemployment rate rising to 7% in May but there are signs that conditions may be stabilizing.

Job losses have been largely concentrated in trade-sensitive sectors like manufacturing, particularly in Southern Ontario, while domestic-facing industries have remained more resilient.

Despite the drag from weaker global trade, strong consumer spending has supported hiring in services, helping keep overall employment growth in positive territory. In June, this mixed dynamic is expected to persist, according to RBC analysts, with sector-specific job losses offset by gains elsewhere, keeping the unemployment rate roughly steady.

Trade uncertainties remain, especially with the expiration of a 90-day pause on some U.S. tariffs approaching. However, the most disruptive scenarios now seem less likely, and Canada continues to benefit from key tariff exemptions under CUSMA, allowing most exports to enter the U.S. duty-free.

While global tensions may still weigh on business sentiment, improving confidence indicators and stabilizing job postings suggest the labour market could be nearing a turning point, with further increases in unemployment likely to be limited.

Wish you all a profitable trading week.