By Noreen Burke

Fxgecko.com -- Friday’s jobs report along with Wednesday’s minutes of the Federal Reserve’s June meeting are set to be the highlights of the holiday-shortened week ahead as worries over the prospect of a recession swirl. U.S. equity markets are embarking on an uncertain third quarter after the worst first half since 1970 with the Fed rapidly tightening monetary policy to quell the highest inflation in decades. Meanwhile, Australia’s central bank looks set to hike rates by a half percentage point on Thursday as inflation continues to soar. Here’s what you need to know to start your week.

1. U.S. jobs report

Recent economic data has added to signs that the economy is cooling amid aggressive policy tightening by the Fed, so investors will be closely watching Friday’s nonfarm payrolls report for how the labor market is performing, given the Fed’s inflation/employment mandate.

Economists are expecting 270,000 jobs to have been added in June, slowing from 390,000 in the previous month but still remaining strong. The unemployment rate is expected to remain steady at 3.6%, pointing to still solid demand even as the economy cools. Average hourly earnings are expected to have increased by 5% on a year-over-year basis.

A weaker-than-expected jobs report could exacerbate fears of a recession and bolster the argument for a less aggressive pace of rate hikes, following the Fed’s most recent 75 basis point move.

2. Fed minutes

The Fed is expected to push ahead with another 75 basis point rate hike at its upcoming July meeting, but the path for September is less clear.

Wednesday’s minutes from the central bank’s June meeting will give investors some insight into how policymakers see the future path of interest rates as markets remain focused on the prospect of a recession.

Meanwhile, the European Central Bank is to publish the minutes of its June meeting on Thursday, when it announced plans to deliver its first interest rate hike since 2011 in July, followed by a potentially larger move in September with Eurozone inflation running at a record high.

3. U.S. economic data

The U.S. is to publish data on JOLTs job openings for May on Wednesday with the number of vacancies expected to slow only slightly to 11 million from 11.4 million in April, equivalent to almost two vacancies for every unemployed American.

The lack of suitable workers available to fill these positions has seen wages increase as companies compete for labor, feeding into the spiral of faster inflation.

The U.S. is also to publish the ISM services PMI for June after last’s week’s ISM manufacturing PMI pointed to a slowdown in both new orders input prices, along with data on factory orders, initial jobless claims and consumer credit.

Several Fed speakers are due to make appearances during the week, including New York Fed President John Williams, speaking Wednesday and again on Friday, plus Fed Governor Christopher Waller and St. Louis Fed President James Bullard.

4. Stocks kick off Q3

Wall Street's three major stock indexes ended sharply higher on Friday, rebounding from early losses on the first trading day of the third quarter, in the wake of the stock market's worst first half in decades. Still, all three indexes posted steep losses for the week.

Market participants are now bracing for several potentially pivotal events in July that could dictate the direction markets take over the coming months.

Investors will be turning their attention to Friday’s employment report ahead of the following week’s U.S. inflation data which will factor into the Fed's decision making at its upcoming meeting on July 26-27.

Second-quarter earnings start arriving in force the week of July 11, indicating whether companies can keep living up to estimates despite surging inflation and growth worries.

5. RBA rate hike

Market watchers expect the Reserve Bank of Australia to deliver another half percentage-point interest rate hike on Tuesday as it attempts to curb inflation running at two-decade highs, marking what would be the first time it has ever hiked rates by that magnitude at consecutive meetings.

They have been revising up their expectations since Governor Philip Lowe’s larger-than-expected half-point hike last month, rather than the 25 basis points that was expected.

The weaker Australian dollar is contributing to higher inflation, along with soaring power and labor costs. Russia’s war in Ukraine and covid lockdowns in China, Australia’s largest trading partner, have also exacerbated inflationary pressures.

--Reuters contributed to this report