- MON : Swiss GDP (Q1), EZ/UK/US Final Manufacturing PMI (May), US ISM Manufacturing PMI (May)
- TUE : RBA Minutes, South Korean Election, South Korean CPI (May), Swiss CPI (May), EZ Flash CPI (May), US Durable Goods (Apr)
- WED : BoC Announcement, Australian GDP (Q1), EZ/UK/US Final Services and Composite PMI (May), ISM Services PMI (May)
- THU : ECB Announcement, Swiss Unemployment (May), Swedish CPIF (May), EZ PPI (Apr), Canadian Trade Balance (Apr)
- FRI : RBI Announcement, CBR Announcement, German Trade Balance (Apr), EZ GDP R (Q1), EZ Retail Sales (Apr), EZ Employment Final (Q1), US Jobs Report (Mar), Canadian Jobs Report (May)
US ISM MANUFACTURING PMI (MON)
The consensus currently expects headline ISM manufacturing to be unchanged at 48.7 in May (note: these expectations may change ahead of the data release). As a basis of comparison, S&P Global’s flash US manufacturing PMI for May rose to a 3-month high of 52.3 from 50.2 in April; the output index also rose to a 3-month high, and back above the 50 mark which separates expansion and contraction (came in at 50.7 from 49.6).
S&P Global said improved performances were driven by faster growth in new orders, with manufacturing inflows rising at the sharpest pace for 15 months. Manufacturing input inventories showed the largest increase on record as firms aimed to guard against tariff-related issues. Manufacturing output returned to growth after declines in March and April, though only slightly.
Manufacturing input costs rose at the sharpest rate since August 2022, while export declines eased from April’s steep fall. Manufacturers’ selling prices increased sharply, posting the largest monthly rise since September 2022. Confidence about the outlook reached its highest level in three months, despite manufacturing jobs being cut for a second consecutive month.
US ISM SERVICES PMI (WED)
The consensus currently sees the headline ISM Services PMI ticking up to 52.0 from 51.6. In terms of a comparison, the S&P Global Services PMI in May rose to 52.3 from 50.8, a two-month high. The S&P Global report noted that “Export orders continued to fall, dropping especially sharply for services, supply chain delays intensified, and prices charged for goods and services surged to an extent not seen since August 2022, overwhelmingly linked to tariffs”.
In terms of demand, growth for services was the strongest since March, primarily fueled by domestic demand, but exports of both goods and services fell for the second consecutive month, with trade policy widely linked to falling foreign sales of both goods and services. Exports of services fell at the sharpest rate since the early 2020 lockdowns, and excluding the pandemic, saw the sharpest fall since late 2014.
Looking ahead, confidence about the outlook rose to a four-month high in services. In terms of prices, average prices for both goods and services rose at a rate not seen since August 2022, when pandemic-related shortages caused widespread price inflation. Charges levied for services rose to the greatest extent since April 2023. On employment, service sector payrolls were trimmed for the second time in four months.
US JOBS REPORT (FRI)
The consensus currently expects 130k nonfarm payrolls to be added to the US economy in May (vs 177k in April; the 3-month average currently stands at 155k, 6-month at 193k, and the 12-month at 157k). The unemployment rate is seen unchanged at 4.2% (note: the Fed’s March projections forecast unemployment would rise to 4.4% this year).
Average hourly earnings are expected to rise by +0.3% M/M, picking up in pace from the +0.2% M/M reported in April. Analysts will be watching the Federal job loss figures, which many think will tick up as severance periods end. Weekly jobless claims data that coincides with the BLS survey window for the jobs report showed initial claims at 226k (vs 216k in the April survey window), and continuing claims at 1.919mln (vs 1.833mln in the April window).
The Conference Board’s monthly consumer confidence data showed views of the labour market weakening in May, though the outlook for the labour market was less negative. Additionally, consumers’ outlook for their income prospects turned positive in May, CB said.
In terms of the Fed’s balance between still above-target inflation, and a "solid" labour market, the recent FOMC meeting minutes noted that risks of higher inflation and higher unemployment have risen recently, and officials saw risks of the labour market weakening in the coming months, and said that it could face difficult trade-offs if inflation persists while the labour market weakens.
BOC ANNOUNCEMENT (WED)
The upcoming meeting is a statement-only affair with a follow-up press conference with Governor Macklem; there will be no update to the MPR. In between the prior BoC meeting and the upcoming meeting, money market expectations have fluctuated in response to recent data. As it stands, money markets are only pricing in 5bps of easing.
Before the recent hot inflation data , a 25bps cut was priced with a 60% probability, but since the hotter-than-expected inflation report, this is no longer the case and a hold is priced as the more likely scenario (80% probability of a hold), which was also bolstered after strong Q1 GDP in Canada. At the prior meeting, the BoC left rates on hold and continued to provide no guidance due to the uncertainties ahead.
However, Governor Macklem did note they are prepared to act decisively if incoming information points clearly in one direction. It is also worth noting that the Minutes of the meeting found that the council was split on whether to cut or hold. Those who favoured a cut cited near-term inflation risks and signs that the economy was weakening.
Looking ahead, money markets are pricing in 35bps of easing throughout the year - this fully prices one more rate cut from the BoC, with a 52% probability of a second.
AUSTRALIAN GDP (WED)
There are currently no expectations for Australian GDP growth. In terms of the most recent RBA, the central bank cut the Cash Rate by 25bps to 3.85%, which was widely expected with money markets pricing in a 99.5% likelihood of a move ahead of the announcement. RBA stated that inflation continues to moderate, the outlook remains uncertain, and that maintaining low and stable inflation is the priority.
Furthermore, the board assessed that this move on rates will make monetary policy somewhat less restrictive, while it remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and supply.
RBA also released its Quarterly Statement on Monetary Policy, which noted that the escalation of global trade conflict is a key downside risk to the economy and that the global growth outlook was downgraded, while the central bank trimmed core domestic inflation forecasts and slightly raised its unemployment view. Analysts at HSBC, in a note dated mid-May, forecasted a “modest negative growth impact” in Australia and suggested that the market shocks are likely slightly disinflationary for the country.
ECB POLICY ANNOUNCEMENT (THU)
Consensus looks for the ECB to cut rates by 25bps, with markets assigning a 95% chance of such an outcome. As a reminder, the prior meeting saw policymakers pull the trigger on another 25bps rate cut, taking the Deposit Rate to 2.25%; a level which saw the central bank omit the reference to rates being viewed as restrictive.
Within the statement, one of the main takeaways was that the Eurozone growth outlook deteriorated owing to rising trade tensions.
Since then, whilst there has been an easing of tensions between the US and China, which led to an improvement in the global trade outlook, a deal between the EU and the US remains elusive. The lack of progress prompted US President Trump to recommend a 50% tariff on the EU as of June 1st.
This threat has since been pushed back to July 9th, and the EU is increasing efforts to get an agreement. However, large gaps between the two sides remain. From a data perspective, flash CPI metrics for the Eurozone will not be released until Tuesday.
However, in recent remarks, Chief Economist Lane is confident that the Bank’s task to bring inflation back to 2% is “mostly completed”. On the growth front, PMI data for May showed an improvement in the manufacturing sector and a deterioration in services, with both metrics still in contractionary territory.
The accompanying release noted “the eurozone economy just cannot seem to find its footing”. Assuming the ECB cuts by 25bps next week, the focus will be on any clues as to what comes thereafter, given the apparent split of views on the GC.
The accounts of the ECB meeting (albeit when trade tensions were higher) showed that some members would have been comfortable with a 50bps reduction, whilst those at the hawkish end of the spectrum, such as Austria’s Holzmann, think the Bank should pause until April. Currently, markets see a total of 54bps of loosening by year-end (including the expected June cut).
For the accompanying macro projections, Rabobank expects growth to be revised down a touch for both 2025 and 2026, while the inflation view is likely to be trimmed for 2025 to 2.0% (Mar. 2.3%) but increased for 2026 to 2.3% (Mar. 2.0%).
CANADIAN JOBS REPORT (FRI)
Participants will be watching the labour market report to see whether or not Trump’s tariffs are having an impact on the labour market. In between the prior BoC meeting and the upcoming meeting, money market expectations have fluctuated in response to recent data. As it stands, money markets are only pricing in 5bps of easing.
Before the recent hot inflation data, a 25bps cut was priced with a 60% probability, but since the hotter-than-expected inflation report, this is no longer the case and a hold is priced as the more likely scenario (80% probability of a hold), which was also bolstered after strong Q1 GDP in Canada. Given this jobs report takes place after Wednesday’s BoC rate decision, it will likely shape expectations for the July meeting, where 16bps of easing is priced, implying a 64% probability of a cut.
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