The Macro Outlook: Macro Crosscurrents – Labor Signals & Geopolitical Risks

by | Mar 2, 2026

The key events for the w/c 2 March 2026: US: payrolls Feb, retail sales, ISM surveys, & Fed Beige Book, Aus GDP Q4, S&P Global PMIs Feb

Macro Recap: Escalation

Events over the past week reinforced the economic and geopolitical crosscurrents facing markets right now. While we noted that broader uncertainty was being shaped by trade policy upheaval and structural technological change, the weekend’s developments have seen heightened geopolitical risk move to the forefront. Beyond the headlines in Washington and the Middle East, the economic backdrop remains caught between “signal and noise” while market sentiment continues to grapple with the structural implications of AI and the continued uncertainty over trade policy.

Geopolitical Risks Shift from Ultimatum to Action

With the transition to active engagement marking a new phase in regional tensions, focus has shifted to the immediate energy and security implications. Markets will need to assess the risk of a prolonged disruption against the possibility of Iran returning to talks with US President Trump (Bloomberg). US and Iranian envoys are expected to continue talks this week on the sidelines of the IAEA Board of Governors meeting in Vienna – in other words, the diplomatic window remains open.

The US Domestic Outlook: Trade Uncertainty and the Economy

Amid the geopolitical tension, several factors are clouding the view of the US domestic outlook. Firstly, US trade policy remains in a state of flux following the successful challenge to emergency tariff powers. For now, the administration’s pivot to a temporary 15% blanket tariff has left businesses navigating an unsettled regulatory landscape.

This policy uncertainty adds a layer of complexity to the broader economic question currently facing the Fed: is the U.S. labor market beginning to stabilize, or was the strength in Jan just “noise”? Last week, Gov Waller was cautious over the Jan labor market ‘signal’ of a stronger labor market (given low hiring, weak JOLTS, narrow payroll breadth, likelihood of downward revisions to Jan data), highlighting the risk of ‘noisy’ data. Gov Waller dissented at the last FOMC meeting, preferring another rate cut – due to still elevated risks of a ‘substantial’ downturn in the labor market, combined with a ‘limited’ risk of higher inflation. His latest assessment still sees this balance. The US labor market data this week will be crucial to whether he’ll shift his outlook; if this week’s Feb report confirms the Jan labor market strength, then he could be more comfortable with a hold in March. However, he said that he could support further cuts even if the labor market improves, due to what he has described in the past as “good news” rate cuts, if inflation continues to make progress toward the 2% target.

Last week, US PPI data for Jan was firmer than expected, but remained below a year ago. While the headline monthly rate increased by more than expected to +0.5% in Jan (from +0.4%), the annual rate fell to +2.8% (from +3% in Dec). Food and energy producer prices were notably lower this month, helping to offset firmer core goods and services producer prices. Core PPI increased by +0.8% over the month, up from +0.6% in Dec. While annual core PPI continued its recent acceleration to +3.6% in Jan (from +3.3% in Dec), it remains below a year ago. Most important is how some of the PPI prices ‘map’ into the Fed-preferred PCE inflation measure. For now, the Cleveland Fed PCE nowcast for Jan (as of 27/2) remains somewhat subdued, with headline PCE at +0.2% over the month in Jan and core PCE rising by +0.27% over the month in Jan. Both estimates are below Dec and below (or just below) the monthly PCE rates in Jan a year ago.

Australia CPI: Headline vs. Underlying Divergence

Aus CPI continued to firm as headline CPI increased to +3.8% in Jan (from +3.7% in Dec), while the monthly pace also increased to +0.5% in Jan (from +0.2% in Dec). Both measures of core inflation (trimmed mean and median) edged higher over the year to +3.4% and +3.6%, respectively. However, the median and trimmed mean inflation rates are now below the headline (SA) rate. So while the headline inflation rate has increased over the last several months, underlying inflation, while still elevated, has not worsened to the same degree, suggesting that the increase in the headline rate has likely been influenced by outlier effects rather than a further broadening of inflation pressures. However, inflation through the centre of the distribution remains persistent. Over the week, market expectations for further rate hikes remained little changed.

Outlook for the week ahead

While markets will continue to assess the unfolding conflict in Iran, it will be a busy week of important US data.

The key focus this week is US labor market data including non-farm payroll growth for Feb. This will be an important release to assess whether the Jan strength was a genuine “signal” of a labor market on firmer footing or merely statistical noise.

Beyond the labor market, several key indicators will provide an early read on Q1 momentum: the Feb ISM surveys, the Jan retail sales report, and the release of the Fed’s Beige Book ahead of its meeting in the middle of this month.

Key factors & events to watch this week:

Geopolitical Risks

  • Iran: Now that military action has commenced, uncertainty over the outlook and scope of this conflict remains elevated. Early reporting indicated that US President Trump was “open to dropping sanctions on Iran if its new leader was “pragmatic”. Iran also made a fresh push to resume talks with the US, the Wall Street Journal reported” (source: Bloomberg).

US Labor Market Data – Feb

The broad suite of US labor market data will be released this week, providing the Fed with a comprehensive update on labor market conditions.

  • Non-farm payrolls are expected to increase by 58k in Feb, a notable step down from +130k in Jan, but still above the weaker trajectory through to the end of 2025. The direction of revisions to the Jan growth will also be important.
  • Early in the week, the ADP employment change is expected to increase by +49k, up from +22k in Jan.
  • The unemployment rate is expected to stay unchanged at 4.3%, while the participation rate is also expected to be little changed.
  • Average weekly hours are expected to be unchanged at 34.3 hours/week.
  • Average weekly earnings are expected to slow to +0.3% over the month (from +0.4% in Jan).
  • The Challenger Job Cut Announcements survey will also remain in focus after the notable increase in Jan to 108k announcements, while hiring announcements had remained subdued.
  • The JOLTS report for Jan is due out on 13 Mar 2026.
  • The non-farm productivity for Q4 is expected to increase by +1.7% in Q4, down from +4.9% in Q3. Unit labor costs for Q4 are expected to increase by +2.1% after falling by 1.9% in Q3.
  • Initial claims are expected to remain lower at 215k in the wk ended 28 Feb (from 212k in the prior week).

US growth momentum for Q1

The employment, ISM, and retail trade data will provide an early update for the Atlanta Fed GDP nowcast for Q1. The current nowcast (based on limited data) shows the US GDP growth run rate at +3%.

  • The ISM PMIs for Feb are expected to move somewhat lower for manufacturing to 51.7, while the ISM services PMI is expected to be little changed at 53.5.
  • Retail sales for Jan are expected to fall by -0.3% after a flat result in Dec. The retail control measure, which feeds into the GDP calculation, will be important, and fell marginally in Dec by -0.1%.

Fed speeches & data

  • The latest Fed Beige Book will be released this week and will provide an anecdotal update on changes in activity over the last six weeks. This is usually an important input into the FOMC meeting. Fed speeches will be limited this week.

Global Data

  • Australia: Q4 GDP is expected to increase by +0.7%, up from +0.4% in Q3. Annual growth is expected to be unchanged at +2.1%.
  • Euro area CPI (prelim) for Feb is expected to be unchanged at +1.7% for headline CPI and +2.2% for core CPI.
  • The full suite of S&P Global PMIs for Feb will be released through the early part of the week.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 2Mar2026Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net

The Macro Outlook: Navigating Macro & Geopolitical Crosscurrents

by | Feb 23, 2026

The key events for the w/c 23 February 2026: US tariff ruling fallout, State of the Union, earnings, data (PPI), and geopolitical headline risks.

Outlook for the week ahead

Events in the coming week highlight the macroeconomic and geopolitical crosscurrents facing markets right now. While the U.S. domestic data calendar is relatively light this week, broader uncertainty is being shaped by renewed trade policy upheaval, structural technological change, and heightened geopolitical risk. As markets digest the administration’s latest pivot toward a 15% blanket tariff, President Trump will give the State of the Union address this week, likely addressing trade, tariffs, and the upcoming midterms.

Beyond Washington, market sentiment regarding AI capability is shifting from broad excitement toward a more critical assessment of viability across sectors, placing tech earnings under the spotlight this week. Simultaneously, the geopolitical environment remains one of elevated risk; tensions with Iran have intensified following the US President’s 10-to-15-day ultimatum.

With Fed officials, such as Governor Waller, providing his latest assessment of the US economic outlook, and key data points from Australia, Japan, and Canada filling the gaps, the week ahead is less about new data and more about how these forces might shift or reshape economic expectations for 2026.

Key factors & events to watch this week:

US Trade & Policy: The State of the Union and the Tariff Pivot

  • Focus: the weekend announcement of a pivot to a 15% blanket tariff, plus what the Supreme Court ruling will mean for existing or newly negotiated trade deals. This is a fluid situation with many open questions, especially about how the administration will navigate this ruling and what it will mean for the broader economy.
  • US President Trump’s State of the Union speech.

Technology: From AI Excitement to Structural Repricing

  • Earnings, and especially tech earnings, will be in focus this week (Nvidia).

The Fed & Inflation: Parsing the Last of 2025

  • There will be several US Fed speeches, but of note will be Fed Gov Waller on the Economic Outlook – usually an important speech that will provide his updated view of growth, inflation, and labor market risks. Gov Waller was one of two dissents at the last FOMC meeting – preferring a further 25bps cut. Gov Waller will also give another speech later in the week on “Technology”.
  • Fed Governor Cook will give a speech on AI and Productivity, and Vice Chair (Supervision) Bowman will provide testimony at the Hearing on Update from the Prudential Regulators.
  • US PPI for Jan will be released this week (Fri) – an important catch-up release, providing key inputs for the more up-to-date PCE price index data for Jan. Headline PPI for Jan is expected to slow to +0.3% over the month in Jan (from +0.5% in Dec), while the annual headline rate is expected to slow to +2.6% in Jan (from +3% in Dec). Core PPI is expected to increase by +0.3% over the month in Jan (from +0.7% in Dec), while the annual rate is expected to slow to +3% in Jan (from +3.3% in Dec).

Global Data

  • Australia: The new monthly CPI series for Jan is expected to show little change in core measures of CPI. From the prior report, the Dec trimmed mean came in at +3.3% over the year, while the median CPI came in at +3.6% over the year. Inflation remains a key area of concern for the RBA. Aus GDP partials will also be released throughout the week.
  • Japan: Tokyo CPI for Feb; the core CPI – ex fresh food is expected to slow to +1.7% over the year in Feb from +2% in Jan.
  • Canada: GDP for Q4 will be important ahead of the BoC’s assessment of economic activity. While growth in Q3 had come in higher than expected at +0.6%, there was concern that growth may have stalled through Q4.

Geopolitical Risks

  • Iran: Based on the 19 Feb announcement of a 10–15-day deadline for Iran to make a deal on its nuclear program or face possible military action, this is an important week in the lead-up to that deadline.

This week, the US Treasury will auction and settle approx $562bn in ST Bills, FRNs, and 30-Year TIPS, raising approx. $74bn in new money. The US Treasury will also auction the 2-year, 5-year, and 7-year Notes this week – to settle on 2 Mar. Approx $10bn in ST Bills will mature on the Fed balance sheet and will be reinvested.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 23Feb2026Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net

The Macro Outlook: A Cautious Rebalancing

by | Feb 16, 2026

The key events for the w/c 16 February 2026: US PCE inflation, Q4 GDP, & FOMC Minutes, Global CPI data, RBNZ Policy Meeting, S&P Prelim PMIs Feb

Macro Recap: Constructive Data for the Fed Mandate

US data last week provided a solid update to the Federal Reserve’s “balance of risks”. The results reflected a constructive shift on both sides of the mandate: disinflation in the CPI continued, though it is not yet back to the 2% target, while signs of stabilization in the labor market helped to alleviate more immediate concerns over near-term weakness. While these trends remain to be fully confirmed, both metrics moved in the right direction, providing a constructive enough backdrop to keep the Fed on hold. The broader context for Q4 growth did shift lower, as weak retail sales in Dec confirmed a softer spending trajectory to end the year. However, the outlook remains resilient, especially given the Fed’s existing expectation for a shutdown-related disruption to Q4 activity.

US Labor Market: Signs of Stabilizing

The Jan labor report likely aligns with the Fed’s view of signs that the labor market is stabilising. This was seen across several key indicators in Jan:

  • Non-farm payrolls increased by a notably higher-than-expected +130k, with only a minor downward revision to the prior month. This marked the largest increase in non-farm payrolls since Dec 2024. The gains were led by the private sector (+172k in Jan), while government payrolls contracted by -42k. While the private hiring trajectory has been more encouraging since the shutdown, the direction of future revisions will be important in determining if this forms an enduring trend.
  • After the annual benchmark revisions, the annual growth in private payrolls for 2025 was revised from +733k to +367k, bringing the data in line with the weaker labor market conditions throughout the year.
  • The unemployment rate edged lower to 4.3%, despite an increase in participation. This is a welcome undershoot of the latest Fed projection of the year-end unemployment rate of 4.5%.
  • Growth in hours & wages supported nominal income growth in Jan. Average weekly earnings growth rebounded in Jan to +0.4% (from a softer 0% in Dec), while aggregate hours worked increased by a solid +0.4% in Jan (after a fall of -0.2% in Dec). Growth in hours aligns with some of the stronger activity (output) reports for Jan.

Retail Sales: Real Spending Slowdown in Q4

While the stabilizing labor market supported the income side of the equation for Jan, the consumption side showed a more cautious, trend-like deceleration in Dec.

  • Nominal stalling: Headline nominal retail sales growth stalled in Dec after increasing by +0.6% in Nov. The result was led mostly by a fall in motor vehicle sales and smaller falls in clothing, misc., and foodservice.
  • In real terms, sales fell by -0.3% in Dec, after increasing by +0.4% in Nov – which brings the Dec qtr change to -0.2% in real terms, versus +0.6% in the Sept qtr.
  • GDP Implications: This softer spending result aligns with the Fed’s expectation of a shutdown-related slowdown. Consequently, the contribution from consumer spending in the Atlanta Fed’s GDPNow forecast for Q4 was reduced, with the overall growth run rate slowing to +3.7% in Q4.

Jan CPI: Downside Surprise Amid Underlying Stickiness

  • Headline CPI was lower than expected, slowing to +0.2% over the month in Jan (expecting +0.3%) and slowing to +2.4% over the year in Jan (from +2.7% in Dec). The main contributors to the headline annual deceleration were the fall in gasoline and used car and truck prices.
  • Core CPI came in as expected, accelerating to +0.3% over the month (from +0.2% in Dec), while annual core CPI slowed to +2.5% in Jan (from +2.7% in Dec). The fall in used car prices slowed core goods inflation to 0% in the month, which was more than offset by an increase in core services inflation, possibly related to annual corporate price increases.
  • Underlying Trends: The relatively higher trimmed mean (+2.7%) and median (+3.0%) inflation rates suggest that underlying pressure remains stickier than the core CPI indicates. In other words, there is still some persistence in underlying inflation through the middle of the distribution. Both measures, however, remain on a clear disinflationary trajectory.

While the larger improvement in CPI since Sept could be related to the restart of the data collection post-shutdown disruption, the broader disinflation trend remains in place. The focus now shifts to how the Fed’s preferred PCE price index evolves; the Dec PCE inflation data due this week is expected to show some firming. For the moment, market expectations for a Jun rate cut remain unchanged (source: CME Fedwatch).

Outlook for the week ahead: US PCE inflation, Q4 GDP, & FOMC Minutes, Global CPI data, RBNZ Policy Meeting, S&P Prelim PMIs

The coming week presents another important slate of US data as we close out the 2025 picture.  While Jan’s CPI provided a welcome reprieve, the upcoming Fed-preferred PCE report for Dec is expected to reflect a firmer year-end inflation profile. Personal income and spending data will feed into the Advance Q4 GDP report, which is expected to offer a view of resilient economic activity despite the government shutdown disruption. This combination of sticky inflation and resilient growth data doesn’t necessarily shift the goalposts for the Fed, but it does reinforce the “solid” economic conditions. Rather than signalling a pivot, these prints would likely confirm that the Fed can afford to remain patient, as the lack of a growth “cliff” removes the urgency for aggressive easing. Globally, the focus shifts to Jan CPI reports for the UK, Canada, and Japan, while the Feb prelim S&P PMIs will provide further insight into momentum across key markets at the start of the new year.

Key factors & events to watch this week:

US PCE Inflation (Dec) will be a key report for the Fed and is expected to show inflation remaining firm at the end of 2025.

  • Headline PCE inflation is expected to increase by +0.4% in Dec, up from +0.2% in Nov. Over the year, headline inflation is expected to increase to +2.9%, up from +2.8% in Nov.
  • Core PCE inflation is expected to increase by +0.3% in Dec, up from +0.2% in Nov. Annual core PCE inflation is expected to increase by +3% in Dec, up from +2.8% in Nov.
  • The current FOMC year-end projection for core PCE inflation is +3%.

US growth at year-end 2025

  • The advance estimate for Q4 GDP in 2025 is expected to be +2.8% annualized, down from +4.4% in Q4. This would translate into year over year growth of +2.6% at the end of 2025, well above the current Fed projection for year-end growth of +1.7%.
  • Personal spending growth for Dec is expected to slow to +0.4% from +0.5% in Nov.
  • Personal income growth for Dec is expected to be +0.3% in Dec, unchanged from +0.3% in Nov.
  • Durable Goods Orders for Dec are expected to fall by -1.8% after the stronger +5% in Nov.
  • Housing data will continue to catch up with Building Permits and Housing Starts for Nov and Dec to be released this week.

FOMC Minutes & Fed speeches

  • The minutes of the Fed meeting in Jan will be released this week. At the last meeting, the Fed kept rates on hold while signalling a subtle realignment in the balance of risks to its mandate. Two Committee members dissented.
  • There will be several Fed speeches this week – though none so far on the economic outlook.

Global CPI reports (Jan)

  • Canada’s CPI for Jan is expected to increase to +0.1% over the month after falling by -0.2% in Dec. Over the year, headline inflation is expected to ease back from +2.4% as the base effects from last year’s GST holiday fall away. BoC measures of core inflation: trimmed mean is expected to continue to moderate to +2.6% in Jan, from +2.7% in Dec, while the median is expected to remain unchanged at +2.5%.
  • UK CPI is expected to ease to +3% in Jan, from +3.4% in Dec, while core CPI is expected to continue to ease to +3.1% in Jan, from +3.2% in Dec. The latest BoE inflation forecasts show a faster return to the 2% target.
  • Japan’s National Core CPI (ex-fresh food) for Jan is expected to slow to +2% over the year, from +2.4% in Dec. This slowing is in line with BoJ expectations that inflation will slow to below 2% in H1 2026, due to “waning food prices”, while the latest inflation forecasts were upgraded.

Australia – RBA Minutes & Labour Market for Jan

  • The minutes of the latest RBA meeting will be released this week, providing some insight into the decision to hike the cash rate by 25bps.
  • The Jan labour market survey is expected to show somewhat softer employment growth of +20k this month (from +65k in Dec), and the unemployment rate to edge back up to a still historically low 4.2%. Growth in the Q4 wage price index is expected to be unchanged at +0.8%.

The RBNZ will meet for the first time this year, under the new leadership of Governor Breman. The RBNZ is expected to stay on hold at 2.25%.

Finally, the suite of global prelim S&P PMIs will be released for Feb, providing insight into whether the Jan expansion was maintained.

This week, the US Treasury will auction and settle approx $700bn in ST Bills, Notes, and Bonds, raising approx. $84bn in new money. The US Treasury will also auction the 20-year Bond and 30-year TIPS this week. Approx $50bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be reinvested.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 16Feb2026Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net

The Macro Outlook: US Labour Market, Retail Sales, & Inflation

by | Feb 9, 2026

The key events for the w/c 9 February 2026: US Labor Market, Retail Sales, and CPI

Macro Recap: Funding Lapse & Postponed US Labor Data

Due to the lapse in US government funding early last week, the release of the US non-farm payrolls and broader employment report for Jan were postponed to this week. In the absence of this more consequential data, attention shifted to softening second-tier US labor metrics and the gap between resilient business surveys and a cooling labor market.

The week was also characterized by the trio of key central bank decisions, which highlighted a growing divergence in policy outlooks.

Softer Labor Market Metrics for January So Far

While awaiting the full January report, a range of softer metrics reinforced the “low-dynamism” setting of the US labor market.

  • JOLTS: The Dec survey showed a notable fall in job openings to 6.5m and a revision lower to Nov. The job opening rate fell to 3.9 in Dec – the lowest since the onset of the pandemic (after reaching a brief low of 3.4 in Apr 2020). Falling job openings have acted as the key ‘shock absorber’ for the Fed as it aimed to cool wage pressure while keeping unemployment low in this cycle. However, with openings relative to the number of unemployed persons falling below a 1:1 ratio (in Dec), the risk of a more notable deterioration remains high. Underlying the fall in job openings, there was a small improvement in hiring relative to separations but no change overall to the low-hiring, low-firing environment.
  • Challenger Report: The Jan report saw another large increase in job cut announcements, reversing the more subdued readings from the prior two months. Also concerning was the drop in hiring plan announcements, which fell to the lowest level since the survey started in 2009.  

US PMIs: Output and Employment Disconnect

The Jan PMI surveys highlighted the ongoing disconnect between the robust expansion in output and the tepid employment response.

  • Manufacturing and Services: Both surveys recorded jumps in output and demand growth, while hiring momentum was yet to follow. Selected industry commentary remained downbeat – especially in manufacturing.
  • Price indexes remained elevated, highlighting more persistent inflationary pressure, though the Jan impulse could be seasonal.
  • Sentiment risks remain. Positive sentiment from lower interest rates and government support continues to be offset by tariff-led inflation and political uncertainty stalling consumer spending at the start of the year.

Central Bank Divergence: RBA, BoE, and ECB

Inflation served as the primary axis of divergence among central bank decisions this week.

RBA – Tapping the Brakes (Hike to 3.85%)

The RBA delivered a unanimous 25bps hike in response to concerns of higher and persistent inflation. The Board flagged “excess demand” and signalled that financial conditions may not be as restrictive as previously thought. The projected return to its inflation target has been pushed out to 2028. Forward guidance was again suspended due to high uncertainty over the persistence of inflation. The RBA is remaining in a data-dependent stance, ruling “nothing in or out” regarding future moves.

BoE – A Dovish Hold (3.75%)

The razor-thin 5-4 decision to hold reflects a delicate balancing act. The Committee is weighing the risk of easing too much before inflation is sustainably back to target against the risk of easing too little, now that economic slack is judged to be widening amid a subdued outlook for demand. Despite the decision to stay on hold, the Committee is expecting a faster return to the inflation target from April. Guidance was clear: based on current evidence, the Bank Rate is likely to be reduced further. Judgements around further easing will become (or, remain) a closer call.

ECB – Watchful Hold (2%)

The ECB maintained current policy settings, signalling they are in a “good place” with inflation remaining consistent with the 2% medium-term inflation target. With no reduction in its assessment of broader risks, specifically regarding tariffs and geopolitical shifts, ECB guidance remained suspended. In the absence of new forecasts, the ECB is focused on the evolution of services inflation and wage growth to confirm that the disinflationary trend is enduring.

Outlook for the week ahead: The Big Three – US NFP’s, Retail Sales, and CPI

This is a significant week for U.S. macro data, covering the “big three”: non-farm payrolls & the employment situation, household spending, and inflation. While the FOMC remains on hold for now, these upcoming data points will provide a critical update to the Fed’s ‘balance of risks’ regarding its dual mandate, and could shift market expectations for the timing of the next rate cut.

Key factors & events to watch this week:

US Labor Market (Jan) and Annual Benchmarking 

The labor market remains a primary focus following the FOMC’s shift characterizing labor market conditions as “stabilizing”. Any clear deviation from the ‘stabilizing’ trend would likely force a re-evaluation of the current ‘on hold’ stance well before the market’s expected Jun cut window.

  • Non-farm payroll growth is expected to rebound to +70k in Jan, from +50k in Dec.
  • The annual benchmarking process and updated seasonal adjustment factors are likely to complicate the view of the labor market and are expected to show a downward revision to payroll growth.
  • The unemployment rate is expected to be unchanged at a low 4.4%.
  • Average weekly hours are expected to be unchanged at 34.2 hours.
  • Average hourly earnings are expected to slow to +3.6% in Jan from +3.8% in Dec.
  • The Employment Cost Index for Q4 is expected to increase by +0.8% (from +0.8% in Q3).
  • After ticking up to 231k last week, initial jobless claims are expected to fall back to 222k for the week ending 7 Feb.

US Retail Sales – Dec

  • Headline retail sales growth is expected to slow to +0.4% in Dec from +0.6% in Nov. The retail control group (which factors into the GDP calculation) increased by +0.4% in Nov and is expected to remain little changed.

US Inflation – CPI Jan

  • Annual headline and core CPI are expected to moderate in Jan. Headline CPI is expected to increase by +0.3% over the month in Jan, from +0.3% in Dec. The annual rate is expected to slow to +2.5% in Jan, from +2.7% in Dec.
  • Core CPI is expected to increase by +0.3% over the month in Jan, from +0.2% in Dec. Annual core CPI is expected to slow to +2.5% in Jan, from +2.7% in Dec.

US Fed Speeches

  • There will be a wide range of Fed speeches this week. Of note will be Fed Governor Waller: while his topic is ‘digital assets’, he may speak on the economy.

This week, the US Treasury will auction and settle approx. $525bn in ST Bills, raising approx. $62bn in new money. The US Treasury will also auction the 3-year Note, the 10-year Note, and the 30-year Bond this week, to settle next week. Approx $16bn in ST Bills will mature on the Fed balance sheet and will be reinvested.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 9Feb2026Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net

The Macro Outlook: Central Bank Meetings and the US Labor Market

by | Feb 2, 2026

The key events for the w/c 2 February 2026: US Labor Market, Central Bank Meetings: RBA, BoE, and ECB, S&P Global PMIs Jan

Macro Recap: Fed Leadership Change & Policy On-Hold

Late last week, the impending change in Fed leadership came into sharp focus with the announcement of Kevin Warsh as the nominee to succeed Fed Chair Powell in May. Markets have begun to digest the implications of this change in Fed leadership for the policy outlook. The change is underscored by a Fed that remains in a delicate holding pattern; while the Jan FOMC meeting saw a second consecutive pause, two dissents highlighted the continued internal debate over the balance between labor market and inflation risks.

The FOMC Hold & Dissent

This leadership announcement arrived after the FOMC signalled a tactical shift in its assessment of the labor market. While the FOMC kept policy settings unchanged as expected, the decision was not unanimous. Governors Waller and Miran dissented, preferring another 25bps rate cut at this meeting. With policy rates now within a ‘plausible range of neutral’, the committee maintained that policy was “well positioned” to calibrate future adjustments, reinforcing market expectations of an extended hold here until the Jun meeting.

The decision to hold hinges on a subtle realignment of the balance of risks to the Fed’s mandate. The Fed now views activity as expanding at a “solid” pace and inflation as “elevated,” but crucially sees the labor market as “stabilizing.” Chair Powell acknowledged this delicate transition during the Q&A:

“I’d say that the upside—again, the upside risks to inflation and the downside risks to employment, have diminished. But they still exist. So there’s still some tension between the mandates. Are they fully in balance? Hard to say.” Fed Chair Powell,Press Conference Q&A 28 Jan 2026.

Governor Waller’s dissent highlighted the tension, as he argued that the labor market remains fundamentally weak, despite the ‘solid’ growth in economic activity. In his assessment, the labor market remains at significant risk of “substantial deterioration”.

US Inflation & Growth Update

Despite a firmer-than-expected PPI print for Dec, the broader inflation trend appears to remain contained. While headline PPI was unchanged at +3%, core PPI accelerated to +3.3% (expecting a slowdown to +2.9%). According to the updated Cleveland Fed PCE Nowcast, these PPI inputs suggest that core PCE likely increased by +2.84% over the year in Dec. This would remain largely consistent with the +2.8% core PCE print in Nov and sits slightly below Chair Powell’s expectation that Dec core PCE is likely to come in “around +3%”, also aligning with year-end Fed projections.

Meanwhile, the Atlanta Fed GDP nowcast for US GDP growth in Q4 slowed to +4.2% as the latest US trade data trimmed the large contribution from net exports. With the official advance Q4 GDP estimate to be released mid-Feb, the growth tracking remains elevated into year-end 2025.

Bank of Canada – Next Move “Difficult to Predict”

The Bank of Canada remained on hold for the second consecutive meeting, noting that current settings were still “at about the right level” to support the economy through its structural adjustment. In a notable shift, the Bank described the timing and direction of the next move as “difficult to predict”, opting instead to remain nimble and preserve optionality in the face of uncertainty over the structural adjustment underway. While updated forecasts had not changed significantly from the Oct meeting, the upcoming review of the USMCA (trade agreement) was noted as a key risk in the outlook.

Outlook for the week ahead: US Labor Market, Central Bank Meetings: RBA, BoE, and ECB, S&P Global PMIs Jan

With markets continuing to digest the implications of the new Fed Chair nomination, the upcoming week brings a heavy slate of consequential data and central bank policy decisions.

Key factors & events to watch this week:

US Labor Market (Jan) and Annual Benchmarking 

The labor market remains a primary focus following the FOMC’s shift characterizing labor market conditions as “stabilizing”. Any deviation from this stabilizing trend could see a re-evaluation of the current ‘on hold’ stance before the Jun meeting.

  • Non-farm payroll growth is expected to rebound to +67k in Jan, from +50k in Dec.
  • The unemployment rate is expected to be unchanged at a low 4.4%.
  • The annual benchmarking process and updated seasonal adjustment factors are likely to complicate the view of the labor market and are expected to show a downward revision to payroll growth.
  • JOLTS: Job openings are expected to increase slightly to 7.2m at the end of Dec (from 7.1m at the end of Nov)
  • The Challenger Job Cut Announcement survey will remain in focus after the slowing trend in late 2025.
  • Initial jobless claims are expected to remain low around 213k for the week ending 31 Jan. Continuing claims have continued to fall.

US Growth and Fed speeches

  • ISM PMIs (Jan):  Manufacturing activity is expected to remain near a stalled pace (expecting 48.5) while services activity is expected to continue expanding at a moderate pace (expecting 53.8).  
  • Fed speeches: Vice Chair Jefferson and Governor Cook will both give speeches this week on the Economic Outlook, likely outlining their views on the economy post the FOMC decision last week.

Central Bank Decisions

  • RBA: Widely expected to hike. The stronger-than-expected inflation results for Q4, together with firmer economic data, have markets pricing in a potential increase of the cash rate to 3.85% at its meeting this week. Focus will be on updated forecasts and guidance for the future rate path (markets are currently pricing approx. 60bps of hikes through June 2027, source: ASX).
  • The BoE is expected to stay on hold after a slim majority to cut at its Dec meeting. The Bank has shifted toward a more balanced assessment of inflation and growth risks, viewing future cuts as a ‘closer call’, and conditional on the inflation outlook.
  • The ECB is also expected to remain on hold this week. At its last meeting, the ECB stayed on hold, with policy settings at a ‘roughly neutral level’.  Given the uncertain international environment, the ECB guidance is likely to keep all options on the table.

Euro Area CPI – prelim Jan

  • The latest prelim Euro area CPI for Jan will be released before the ECB decision. Headline CPI is expected to slow to +1.8% in Jan (from +1.9% in Dec), and core CPI is also expected to slow to +2.2% in Jan (from +2.3% in Dec).

The full suite of S&P Global PMIs for Jan will be released this week, providing the first view of private sector momentum at the start of 2026.

The Japanese parliametary elections will be held over the weekend on 8 Feb.

This week, the US Treasury will auction and settle approx. $751bn in ST Bills, Notes, FRNs, and Bonds, raising approx. $64bn in new money.  Approx $28.5bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be reinvested.

Finally, the latest quarterly refunding announcement will be made by the US Treasury this week.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 2Feb2026Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net