Central banks will dominate the week with Fed, BoE, BoJ and SNB all have their meetings. Additionally, we will get inflation data from the UK, employment data from Australia, economic activity data from China and Q1 GDP from New Zealand in this massively busy week.
USD
New York Fed published a report showing that 1-year inflation expectations sit now at 3.2% compared to 3.6% in April. World bank cut world GDP by 0.4pp now seeing it at 2.3%. US GDP was cut to 1.4% from 2.3% in January and for 2026 it is cut to 1.6% from 2%. GDP projection has been lowered for 70% of economies with China’s staying unchanged at 4.5%.
Latest round of US-China trade talks concluded with pledge from both countries to enforce Geneva protocol. Additionally US has pledged to ease some export controls such as on jet engines and ethane as well as allow students from China to attend US colleges and universities while China agreed to speed up shipments of rare earth minerals to the US. China has given US a six-month license for rare earth exports indicating that it will use those exports in future negotiations. Reports show that US and Mexico are getting close to striking a deal that would reduce steel tariffs.
Treasury Secretary Bessent stated that tariff deadline could be rolled for countries that negotiate in good faith. He added that Trump is highly likely to push back the deadline date, currently July 9, for top trading partners. This just means more uncertainty around tariffs which could push markets into paying little attention to tariff news in the future.
May CPI report came in weaker than expected. Headline number printed 2.4% y/y, up from 2.3% y/y in April, but lower than 2.5% y/y as expected. Monthly reading printed 0.1% increase (0.081% when unrounded). Annualized it is printing 0.9%, more than double less than the target! Core reading stayed at 2.8% y/y for the third straight month while markets expected a 2.9% y/y print. Monthly it also printed 0.1% increase (0.130% unrounded). Annualized core is printing 1.57%. Core services ex shelter rose 0.2% m/m same as services ex energy. Shelter rose 0.3% m/m and 3.9% y/y. Super core rose 0.0305% m/m, which amounts to 0.37% annualized, and 1.853% y/y. Chances of a Fed rate cut in the coming months increased on the back of this report.
Tensions in the Middle East were growing as US-Iran talks are not producing desired results. Reports of US evacuating all of its non-essential staff from the embassy in Baghdad as well as military families from neighbouring Gulf states. Oil has jumped on the news with WTI smashing through $65 resistance and reaching as high as $68. Then on Friday 13, what an irony, Israel hit Iran nuclear facilities with air strikes. Several high ranking military officials as well as scientists were killed. Oil had another leg higher as it reached $75.
The yield on a 10y Treasury started the week at 4.51%, rose to 4.52% and finished the week at around 4.41%. The yield on 2y Treasury started the week at 4.04%, rose to 4.05% and finished the week at around 3.96%. Spread between 2y and 10y Treasuries started the week at 47bp and finished the week at 45bp as curve proceeded to flatten. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 3%, while probability of a no cuts is around 97%. September is the first month with greater than 50% probability of a rate cut. Bitcoin has climbed above $110k during the week but after the Israeli air strikes it plummeted towards $100k. Air strikes caused oil to go as high as $75 while gold crossed $3400.
This week we will have retail sales data as well as Fed meeting. No change to rate is expected. We will get new SEP (Summary of Economic Projections) which will give us clearer picture of how many cuts Fed plans for this week and what is their outlook for growth, inflation and employment. After a benign May inflation report we could see hear satisfaction and some dovish comments from Powell.
Important news for USD:
Tuesday:
Retail Sales
Wednesday:
Fed Interest Rate Decision
EUR
EUR enjoyed a great week as it gained against all major currencies with EURUSD crossing the 1.15 level that has proved to be a tough resistance. The pair tried to break it several times in the past month but finally managed to do it on June 12. Ultimately the pair reached the 1.16 level as well but then return below it after Israeli attacks. Final May inflation numbers came in unchanged for Germany and France at 2.1% y/y and 0.7% y/y respectively while Spain was revised up to 2% y/y from 1.9% y/y as preliminary reported.
ECB member of the Governing Council Isabel Schnabell stated that the bank is getting to the end of cutting cycle. She added that despite trade tensions global growth outlook remains stable and that medium-term inflation stabilizes at target. Core inflation remains elevated but is on a good path to coming down. Financing conditions are no longer restrictive.
GBP
Employment report showed weakness in labour market. Payrolls change for the month of May showed 109k jobs lost for the biggest monthly loss in five years (May 2020, middle of the Covid pandemic). April unemployment rate ticked up to 4.6% while wages eased to 5.3% 3m/y vs 5.5% 3m/y for average weekly earnings and 5.2% 3m/y vs 5.3% 3m/y for ex bonus. ONS added that firms may not be replacing workers that left. Probability of next BoE rate cut moved to August and GBP suffered.
April GDP printed -0.3% m/m vs -0.1% m/m as expected. Services declined by 0.4% m/m after rising 0.4% m/m in March. The report shows that nine out of fourteen subsectors experienced declines. Construction sector was a bright spot as it rose 0.9% m/m. Overall, UK economy started Q2 on a weak foot as tariffs impacted auto industry as well as trade.
This week we will have inflation data and BoE meeting. There will be no change in rates but due to the disappointing jobs report we can expect dovish rhetoric by the bank with even a 6-3 vote.
Important news for GBP:
Wednesday:
CPI
Thursday:
BoE Interest Rate Decision
AUD
China May CPI showed further declines as headline number printed -0.1% y/y for the third consecutive month. Food inflation remained the biggest drag as it printed -0.4% y/y while core inflation ticked up to 0.6% y/y from 0.5% y/y in April. PPI also continued to decline but it plunged -3.3% y/y. It has been in deflation for 32 months, since September of 2022! Trade balance data saw surplus increasing to $103.2bn from $96.1bn in April. Exports increased by 4.8% y/y while imports shrank by 3.4% y/y. Falling imports increase concerns about weak domestic demand. Trade surplus with US continued to decline as exports to the US fell by 34.5% y/y in May, after falling 21% in April. Exports to the US could increase in coming months provided that relationship between countries improves.
This week we will have employment data from Australia as well as economic activity data from China.
Important news for AUD:
Monday:
Retail Sales (China)
Industrial Production (China)
Thursday:
Employment Change
Unemployment Rate
NZD
Electronic retail sales, covering almost 70% of total retail sales, printed -0.2% m/m and 0.9% y/y in the month of May. Israeli attacks and increased geopolitical concerns caused risk off sentiment in the markets and Kiwi suffered, declining on the week against the majors.
This week we will get Q1 GDP data.
Important news for NZD:
Thursday:
GDP
CAD
Building permits fell again in April by -6.6% y/y after declining -5.3% y/y in March. Final manufacturing sales and wholesale trade declined by -2.8% m/m and -2.3% m/m respectively. CAD managed to gain some ground on the back of rising oil prices.
JPY
Final Q1 GDP was revised up, but still came in negative (-0.2% vs -0.7% annualized as preliminary reported). When looking q/q GDP came in flat after -0.2% preliminary print. Private consumption was revised up (0.1% vs 0%) while surprisingly after a strong reading capex was revised down (1.1% vs 1.4%).
This week we will have BoJ meeting. There will be no change in rate but bank is expected to announce that it will reduce the pace of quantitative tightening. BoJ has been buying JPY400bn less bonds per quarter and that number is expected to be reduced to somewhere between JPY200-375bn.
Important news for JPY:
Tuesday:
BoJ Interest Rate Decision
CHF
SNB total sight deposits for the week ending June 6 came in at CHF438.1bn vs CHF444.9bn the previous week. Just a small move as SNB prepares to deliver a rate cut next week and influence Swissy strength in that way.
This week we will have SNB meeting. Markets are pricing in a 25bp rate cut with some parts going as far as a 50bp rate cut.
Important news for CHF:
Thursday:
SNB Interest Rate Decision
