Payrolls Data

Investors will be closely monitoring Friday's August employment data for any indications regarding the Fed's potential aggressiveness as it gets ready to lower interest rates for the first time in years.

Fed Chair Jerome Powell has signalled that interest rate reductions are warranted, and the markets anticipate that the process would commence with a 25 basis point decrease during the meeting on September 17–18.

The possibility of a recession, which rattled markets in late July and early August, might resurface with any signs of weakness in the labour market. The selloff was made worse by the effect of the Japanese yen carry trade.

Other updates on the state of the labour market are out ahead of Friday's report. The first comes from Wednesday's Jolts job vacancies report, which also includes information on layoffs. Along with the weekly report on initial unemployment claims, ADP statistics on hiring in the private sector will be made public on Thursday.

Bank of Canada

When it meets on Wednesday, the Bank of Canada is most likely to announce its third straight rate reduction.

The market is presently anticipating two more rate cuts this year after September. The bank has already lowered its benchmark rate twice since June, bringing it down to 4.5%.

The Canadian economy expanded at a somewhat quicker-than-anticipated rate in the second quarter, according to data released on Friday. However, June's growth was flat, indicating impending weakening, and Statscan said that preliminary projections indicated there would be no increase in July either.

BoC Governor Tiff Macklem made a suggestion during the bank's July meeting to reorient the bank's priorities from containing inflation to fostering economic growth.

History shows weakness in Sep & Oct

In anticipation of impending Fed rate cuts, Wall Street equities surged, and the Dow reached an all-time closing high for the second day in a row on Friday.

Since the early August selloff, markets have recovered, and indications that the rise is spreading provide investors who are concerned about the concentration of wealth in technology shares with hope.

Less well-liked value companies and small caps are also receiving investments from investors, who anticipate that reduced interest rates would help them.

However, Bank of America analysts note that historically, September and October may be turbulent months for equities. They also caution that any unexpected developments in economic data might lead to new market shocks.

Oil Worries

Oil prices saw significant monthly losses and a lower weekly close as predictions of an increase in OPEC+ supply beginning in October mounted.

According to Reuters on Friday, OPEC+ is continuing with its plans to boost output starting next month as the impact of weak demand is mitigated by the disruptions in Libya and the cutbacks that certain members have promised to make up for overproduction.

Strong consumer expenditure figures on Friday argued against a quicker pace of easing, adding to the uncertainty around anticipated rate reduction from the Fed. Reduced rates may stimulate the economy and increase the need for oil.

(Sources: investing.com, reuters.com)