Weekly Market Forecast (June 3-7)

Upcoming events:

• Monday: China Caixin Manufacturing PMI, Swiss Manufacturing PMI, Canadian Manufacturing PMI, US ISM Manufacturing PMI.
• Tuesday: Swiss Consumer Price Index, US job opportunities.
• Wednesday: Average monetary income in Japan, Australian GDP, China Caixin Services PMI, Eurozone PPI, US ADP, Canada Services PMI, Bank of Canada Policy Decision, US ISM Services PMI.
• Thursday: Swiss unemployment rate, euro zone retail sales, European Central Bank policy decision, US unemployment claims.
• Friday: US NFP report, Canadian labor market report.

Monday

The US ISM Manufacturing PMI is expected to record 49.8 versus 49.4. the S&P Global Manufacturing PMI It rose to 52.4 compared to 51.1, and in general the report showed this Business activity expanded to its highest level in two years. The details also showed that “input costs and output prices rose at faster rates, with manufacturing taking over as the main source of price growth over the past two months.”The overall rate of selling price inflation remained below the average seen over the past year“.

Tuesday

The monthly Swiss CPI is expected to be 0.4% versus 0.3% previously. the final report The annualized interest rate beat expectations at 1.4% versus 1.1% expected, but the rate remained within the Swiss Central Bank’s expectations. A June rate cut is essentially a flip of a coin, but a downward surprise would make the market a little more confident of another cut.

Swiss Central Bank President Jordan He also said that if the upside risks to Swiss inflation materialize, these risks would likely be linked to a weakening of the franc, which could be countered by selling foreign exchange reserves (buying the Swiss franc). So, An upward surprise could give the Swiss franc a bigger boost, as the market should rule out chances of an interest rate cut in June and expect the central bank to support the currency..

US employment is expected to fall to 8.350 million from 8.488 million previously. the final report It again showed a decline as the labor market continues to achieve better balance. The smoking cessation rate also fell to its lowest levels in the new cycle and This should be good news for inflation because it generally leads to wage growth.

Wednesday

The Bank of Canada is expected to reduce interest rates from 5.00% to 4.75%. The market-based probability jumped to an 80% chance after the period of weakness Canadian GDP Data. Expectations were already leaning towards a rate cut after the last one Canadian CPI report where The Bank of Canada’s favored core inflation measures surprised with a decline and finally fell within the 1-3% target range.. The central bank is likely to refrain from pre-committing to another interest rate cut and state that it will depend on the data.

The US ISM Services PMI is expected to come in at 50.5 versus 49.4 previously. As mentioned previously, the Global PMIs from Standard & Poor’s Surprised to the upside with Services in particular measure expectations with a wide margin. The focus will likely be on the employment sub-index ahead of the non-farm payrolls report, but the data we have so far suggests that the US economy is doing well, and that the labor market remains resilient.

Thursday

The European Central Bank is expected to reduce interest rates from 4.00% to 3.75%. This rate cut has been sent out with great force, therefore The focus will be on what the central bank intends to do next. Recent data showed that the economy has regained its strength with the labor market remaining strong. This may give decision makers a reason to err on the side of caution, even though it is more recent Eurozone Purchasing Managers’ Indices showed that Inflationary pressures continue to ease. The market expects two more interest rate cuts from the ECB this year, but as always, this will depend on the data.

US unemployment claims remain one of the most important releases to follow each week, as they are a convenient indicator of the state of the labor market. This is because inflation rate falling to the target level set by the Federal Reserve is more likely as the labor market weakens.
However, a flexible labor market can make achieving the goal more difficult.

Initial claims continue to hover around cycle lows, while continuing claims remain steady around the 1800K level. Initial claims this week are expected to be 215,000 versus 219,000 beforewhile there is no consensus at the time of writing on the ongoing claims although the previous release showed an increase to 1791K versus 1797K expected and 1787K previously.

Friday

The US Nonfarm Payrolls report is expected to show 180,000 jobs added in May versus 175,000 jobs added in May AprilThe unemployment rate remained unchanged at 3.9%. Average hourly earnings on an annual basis are expected to reach 3.9% versus 3.9% previously, while month-to-month is expected to reach 0.3% versus 0.2% previously.

The labor market data we obtained for May was generally positive With the S&P Global PMI reporting a slowdown in the rate of job losses, US unemployment claims remained strong, and labor market details rebounded in the US Consumer Confidence report. Therefore, the bias should lean toward the good version.