This week will be focused on major economic data and political events, including eurozone inflation, US employment data and the UK general election.
advertisementFinancial markets will be keeping an eye on several key economic data points that could shape market trends this week. The Eurozone is due to release its June inflation estimates, and global central bank leaders are scheduled to speak at the ECB forum. Additionally, the US is due to release important employment data, which will provide insight into the trajectory of the Fed’s interest rates. The UK general election will also be in focus.
Europe
Germany is due to release its preliminary Consumer Price Index (CPI) for June. The country’s annual inflation rate rose to 2.4% in May, the highest in five months. Service costs were the main driver of the price increase. Consensus forecasts indicate that German inflation will remain firm, rising 0.2% m/m in June.
More importantly, Eurostat is due to release its initial estimates of euro area inflation, based on energy prices and preliminary Consumer Price Index (CPI) figures for the 13 euro area countries. Annual inflation rose to 2.6% in May from 2.4% in April, the highest in three months. The increase was driven mostly by higher energy prices. Early reports from major euro area countries indicate that inflation may slow slightly in June, with consumer prices rising by 2.5% and core inflation, excluding food and energy, easing to 2.8% from 2.9% in the previous month.
Additionally, European Central Bank (ECB) President Christine Lagarde is due to speak at an ECB forum on Wednesday and provide guidance on the central bank’s interest rate trajectory and economic outlook.
Additionally, voting in the UK general election will take place on Thursday, July 4th. According to the latest Politico poll, the centre-left Labour Party is leading with 42% support, while the centre-right incumbent Conservative Party is far behind with 20%, followed by the right-wing populist Reform Party with 18%. The Conservative Party’s drop in approval rating to an all-time low and the Reform Party’s surge in support reflects the results of the EU elections, highlighting public discontent with the rising cost of living.
America
Wall Street will have shorter trading hours due to the Independence Day holiday. In the US, the main focus will be on the domestic labor market and the FOMC minutes. Fed Chairman Jerome Powell will also be speaking at the ECB forum, which will be a key event for global markets.
The May JOLTS jobs data, due out on Wednesday, will be a leading indicator of the overall health of the U.S. labor market. Job openings fell to just over 8 million in April, the lowest level since February 2021, suggesting a cooling in the U.S. labor market. The data will be followed on Friday by the June nonfarm payrolls report, which will provide further insight into the employment situation.
The FOMC minutes will also be released on Wednesday, providing clues about the Fed’s interest rate movement. At its June meeting, the Fed left interest rates unchanged in the 5.25% to 5.5% range and projected only one rate cut this year, instead of the three cuts expected at its last meeting in March.
The U.S. added 272,000 new jobs in May, up from 165,000 in April, but the unemployment rate rose to 4% for the first time since January 2022. Despite these signs of economic softening, the U.S. labor market remains tight and the Fed may continue to delay any interest rate cut decision. Consensus forecasts call for 189,000 new jobs and the unemployment rate to remain at 4%.
Asia Pacific
In Asia, market focus will be on Reserve Bank of Australia (RBA) minutes, Australian retail sales, Japan’s Tankan manufacturing and non-manufacturing PMIs, and China’s Caixin services PMI.
The Reserve Bank of Australia (RBA) minutes are likely to be the most closely watched event as the bank is likely to raise interest rates again at its next meeting in August due to a resurgence in domestic inflation. Spot futures markets indicate a 45% probability that the bank will raise interest rates to 4.6% from 4.35%. However, retail sales are showing signs of slowing due to high interest rates and rising living costs.
