Week of june 2

Last week brought some positive news from the US, like the slight upward revision in Q1 GDP and upbeat durable goods orders, while inflation in certain European economies declined.

The upcoming week promises to be busier, with the release of Euro Area inflation, rate decisions from the BOC and the ECB, and the closely watched NFP.

Week in Review

The week began a bit slower than usual due to holidays in the US and UK, which allowed trade issues to take centre stage when coupled with a lighter calendar.

The FOMC minutes released mid-week largely backed the Fed's "wait-and-see" stance, highlighting concerns over a slowing economy and rising prices. However, durable goods orders came in less negative than expected (-6.3% versus the forecast of -7.8%), while consumer confidence in May rose to 98, above the 87 estimate. The second reading of Q1 GDP was also revised slightly higher to an annual rate of -0.2% from an initial -0.3% reading.

In Europe, French CPI inflation fell to 0.7% from 0.8%, well below the forecasted 1%.

Across the Indo-Pacific, BOJ Kazuo Ueda said that reaching the 2% inflation target is the closest it has been in decades. However, he added that more efforts are needed, which fueled speculation that the central bank may slow its pace of hikes. Japanese officials also announced reduced sales of long-term Japanese bonds (JGBs).

In geopolitics, a US Federal trade court initially suspended several tariffs imposed by the Trump Administration, specifically the "reciprocal" tariffs. However, within a day, an appellate court reversed the decision pending a full court hearing, which typically takes between six months and a year to complete. The White House also outlined a series of measures that could be used to keep tariffs in place, should the Federal court not support the action. Overall, discussions surrounding the trade war were viewed as positive, with both the EU and the US claiming progress.

Biggest Market Movers

• Crude oil prices trended lower throughout the week in anticipation of Saturday's OPEC+ meeting, where a substantial increase in production is expected to be agreed upon, but it closed the week mixed.
• A soft auction of Japanese bonds contributed to weakness in the yen throughout the week, with Tokyo inflation trimming some of the losses.
• The Australian dollar declined nearly 2% from its peak, with softer retail sales and negative capital investment as the latest signs that the RBA will face increased pressure to ease.

Top Events in the Week Ahead

The coming week is packed with economic data that could move many markets, with investors awaiting the NFP report at the end of the week for insights into the state of the American economy.

Eyes on NFP After Mins Highlighted Labour Market

Following the FOMC minutes, which focused on job creation as a factor in monetary policy considerations, the Non-Farm Payrolls in May are expected to decline further to 130K from the previously reported 177K, with shrinking government jobs contributing to the drop. However, the unemployment rate is projected to remain steady at 4.2%. Gold ended the week lower, and if the NFP beats estimates, it could continue falling, with major support at the 50-day MA of $3200 per ounce. Resistance sits at $3370.

ECB Likely to Cut Rates at 90% Odds

The market is pricing in over a 90% chance that the ECB will cut rates on Thursday, with the primary focus being on the signals for July. Economists believe that the central bank is nearing the end of its easing cycle; however, this view may change if flash Eurozone inflation on Tuesday comes in significantly below expectations. The consensus is for a slight decline to 2.1% from the previous 2.2%. Although the market is currently pricing in a pause in rate cuts for the July meeting, investors will likely focus on what ECB President Christine Lagarde says about the economic situation. The EURUSD recently flirted with 1.12 but quickly reversed towards 1.14, with both CPI and the ECB potentially moving the pair. Support below the 50-day MA of 1.12 lies at 1.1150, while resistance sits at 1.1477.

BOC Might Hold, But Macklem Not Too Optimistic

There is less certainty surrounding the BOE decision, with a roughly two-thirds chance of a rate hold as Canadian data has been slightly more positive than expected lately. However, Governor Tiff Macklem remains pessimistic about the economic outlook, leaving mixed signals about what to expect in terms of rate decisions. Below the 21-day MA of 1.3870 and the 1.40 handle, the Loonie could push USDCAD down to 1.3685 regional support should the BOC take on a slightly hawkish stance.

Other Events, Earnings

Monday features the US ISM Manufacturing PMI. Tuesday includes the Reserve Bank of Australia minutes. Australian GDP is scheduled for release on Wednesday. Thursday brings German factory orders and the Canadian trade balance. Friday sees Canadian jobs data.

Notable companies expected to update investors include CrowdStrike, Hewlett-Packard, British American Tobacco, Ferguson, Haleon, Broadcom, Lululemon, and GameStop.