ECB and BoC meetings, NFP from the US and employment data from Canada coupled with inflation data from the Eurozone and Switzerland, Q1 GDP from Australia and Switzerland and PMI data from the US and China will highlight this jam packed week ahead of us.
USD
On Friday May 23 Trump threatened Eurozone with tariffs of up to 50% that will be imposed on June 1. Over the weekend he had a change of heart and delayed implementation until July 8 which caused risk on sentiment. During the week US Federal Court for International Trade blocked Trump’s “Liberation Day” tariffs from going into full effect. They have unanimously ruled out that president has overstepped its authority by imposing tariffs. This will lead to increased uncertainty in the markets. At the end of the week President Trump increased tariffs on steel to 50%.
Elon Musk has unceremoniously left Trump administration. He thanked president for the opportunity to be a part of his administration. May Conference Board consumer sentiment surged to 98 from 85.7 in April while expectations were for an 87 print.
May PCE saw headline number decline to 2.1% y/y from 2.3% y/y in April with a 0.1% m/m increase. Core PCE declined to 2.5% y/y as expected from 2.7% y/y the previous month with also a 0.1% m/m increase. Inflation is subsiding and declining as planned. Personal income had another strong increase of 0.8% m/m while personal consumption printed an increase of 0.1% m/m.
The yield on a 10y Treasury started the week at 4.51%, rose to 4.54% and finished the week at around 4.41%. The yield on 2y Treasury started the week at 4%, rose to 4.05% and finished the week at around 3.89% while the yield on a 30y Treasury started the week at 5.04% level and finished the week at around 4.92%. Spread between 2y and 10y Treasuries started the week at 52bp and finished the week unchanged at 52bp. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 5%, while probability of a no cuts is around 95%. September is now the first month with greater than 50% probability of a rate cut.
This week we will have ISM PMI data as well as NFP on Friday. Headline NFP number is expected to come at 130k with unemployment rate staying at 4.2%.
Important news for USD:
Monday:
ISM Manufacturing PMI
Wednesday:
ISM Services PMI
Friday:
NFP
Unemployment Rate
EUR
Preliminary French inflation for the month of April saw CPI rise 0.7% y/y vs 0.9% y/y as expected and tick down from 0.8% y/y in March. Services inflation also declined and it is now almost at a 2% level with a 2.1% y/y print. Spain inflation came in at 1.9% y/y vs 2% y/y as expected while Italy also posted 1.9% y/y. German inflation print was unchanged at 2.1% y/y.
ECB policymaker Holzmann, the most hawkish member, stated that ECB should delay further rate cuts until at least September. He added that cutting rates at June and July meetings will be very risky stating US-EU trade war as the main source of uncertainty.
This week we will have preliminary May inflation and ECB meeting. Markets are leaning towards 25bp rate cut given that inflation is coming down more than expected.
Important news for EUR:
Tuesday:
CPI
Thursday:
ECB Interest Rate Decision
GBP
BoE Taylor spoke with Financial Times and stated that he sees more risks piling onto downside scenario as trade war will be negative for the growth. He clarified that higher inflation seen in the last print is not due to supply and demand pressures, but it is rather due to one-time tax and administered price changes. If majority of BoE views it like this it opens the door for additional rate cuts.
AUD
Q1 CAPEX data saw a decline of -0.1% q/q vs 0.5% q/q as expected. Private investment fell for the second quarter in a row after printing -0.2% q/q in Q4 of 2024. Building CAPEX was positive for the quarter but it was overshadowed by a big decline in plant/machinery CAPEX. April retail sales missed expectations and declined on the month which coupled with slower construction activity as indicated by declining building permits took its toll on AUD which weakened significantly going into the weekend.
This week we will have Q1 GDP from Australia and official PMI data from China.
Important news for AUD:
Wednesday:
GDP
Saturday:
Manufacturing PMI (China)
Services PMI (China)
Composite PMI (China)
NZD
RBNZ delivered a 25bp rate cut as was expected thus brining the Official Cash Rate (OCR) to 3.25% making it a 225bp cuts in this rate cutting cycle. The statement shows satisfaction with inflation coming down to the targeted band of 1-3%. Prevailing conditions are in line with bringing inflation to mid-point of that range. New Zealand economy is recovering but recent developments in the international economy, trade wars, are expected to slow down that recovery. They would also reduce medium-term inflation pressures. The Committee debated whether to cut rates by 25bp or leave them unchanged. In the end, a cut won with a majority of 5 to 1 vote. Committee also stated that the full effect of cuts that started in August of 2024 is not yet reflected in the economy. US tariffs will dampen demand for New Zealand exports.
Projections see annual CPI increasing to 2.7% in Q3 2025 and then returning near the 2% target midpoint from 2026. OCR is seen at 3.12% in September of 2025, down from 3.23% previously with OCR reaching the low of 2.87% in June of 2026 while 3.1% was seen previously. RBNZ Governor Hawkesby assessed the decision to hold vote on rates as a healthy sign adding that it is not unusual to see it at turning points. He stated that rates are now in neutral zone and it is now more about feeling when setting the policy. Markets were hoping for more and faster rate cuts and with RBNZ clearly slowing the pace and sounding more neutral than dovish NZD strengthened.
Business confidence plunged in May to 36.6 from 49.3 in April. Declines were seen across major categories such as profit expectations, investment and employment intentions, own activity outlook, with notable drops in GDP and employment measures. Ease of credit as well as residential and commercial construction also plunged. Wage expectations also declined coupled with pricing intentions but inflation expectations 1 year out rose to 2.71% from 2.65%.
CAD
Q1 GDP data showed economy growing by 2.2% annualized vs 1.7% annualized as expected. This comes after a 2.6% annualized growth in Q4 of 2024. The report shows that exports were the driving force behind growth. We got a March monthly reading that showed economy grow 0.1% m/m.
This week we will have BoC meeting and employment data. BoC has decided to pause with rate cutting cycle so we should see no change to rate at this meeting.
Important news for CAD:
Wednesday:
BoC Interest Rate Decision
Friday:
Employment Change
Unemployment Rate
JPY
May inflation report saw headline number tick down to 3.4% y/y as expected from 3.5% y/y in April. On the other hand, core numbers came in hotter than expected. Ex fresh food component jumped to 3.6% y/y from 3.4% y/y the previous month and thus reached highest level since January of 2023. Ex fresh food, energy component, so-called core core, rose to 3.3% y/y from 3.1% y/y in April moving to the highest level since January of 2024. April retail sales improved 0.5% m/m and 3.3% y/y from -1.2% m/m and 3.1% y/y in March. Industrial production declined in April by 0.9% m/m. BoJ is faced with a tough decision as inflation is running higher pushing them to raise rates but there are some weaknesses in economic activity as seen in industrial production and overall GDP that should push them toward more accommodative monetary policy.
CHF
SNB total sight deposits for the week ending May 23 came in at CHF443.4bn vs CHF443.2bn the previous week. Swiss economy minister Parmelin stated that they are hoping that trade talks with the US will produce results by beginning of July. SNB Governor Schlagel stated that negative interest rates cannot be ruled out in the coming months.
This week we will have Q1 GDP and May inflation data.
Important news for CHF:
Monday:
GDP
Tuesday:
CPI
