Week ahead: Nonfarm payrolls, OPEC in focus

Market attention shifts to the US labour market with the latest nonfarm payrolls release and wage data which could see further upwards pressure on inflation. Oil markets are looking to the next OPEC+ meeting and on the central bank front it’s the turn of the Bank of Canada to raise rates in an effort to combat inflation. 

Nonfarm payrolls 

The latest gut check from the US labour market comes on Friday with the nonfarm payrolls data. Last month’s report showed jobs growth accelerated to +428,000 in April, whilst wages were up 0.3%, or +5.5% year-on-year. The wage component appears increasingly important to the Fed as it looks to raise rates aggressively over the summer. Spiralling wages could force the Fed to move at an even faster pace than is currently expected. The Atlanta Fed’s latest data shows wages growing 6.6% year-on-year, though this data has been steady for the last two months. 

Bank of Canada 

The Bank of Canada’s policy rate, at 1%, is “too stimulative” and should return to more neutral levels “quickly,” officials have said. In April the BOC raised rates by 50bps, the largest single increase in two decades. Markets expect another 50bps move this week and there is even chatter about 75bps being on the table. 

OPEC 

OPEC+ meets again this week to discuss output. OPEC and non-OPEC partners agreed last month to raise production targets by 432,000 barrels per day, sticking to the existing strategy of gradually unwinding supply cuts. It’s not expected they will change course yet despite Brent and WTI crude holding well above $100 even as China remained in lockdown, a massive SPR release fed into the market and recession fears should be cooling the demand outlook. Meanwhile global inventories are approaching ‘precarious levels’, according to BofA. 

Economic data 

Whilst the UK revels in an extended bank holiday weekend on Thursday and Friday, the economic data is set to keep coming. Tuesday sees the US consumer confidence survey and Australian GDP figures. Wednesday’s highlights are likely the ISM manufacturing PMI and JOLTS job openings reports. Thursday’s ADP private payrolls report is always assessed for indications ahead of the nonfarm payrolls on Friday.  

Major economic data