Market Outlook for the Week of 3rd – 7th June

On Monday, attention will be centered on the U.S. with the release of the final manufacturing PMI and the ISM manufacturing PMI. Moving into Tuesday, Switzerland will release its CPI data, while the U.S. will publish the JOLTS job openings report.

Wednesday brings several economic data releases. Australia will report its quarterly GDP figures, the U.S. will get the ADP non-farm employment change and the ISM services PMI, while in Canada, the BoC will have its monetary policy announcement.

The ECB will follow Thursday with its own monetary policy announcement and Friday will see important labor market data from Canada, including the employment change and the unemployment rate. The U.S. will release the average hourly earnings m/m, non-farm employment change and the unemployment rate.

The consensus for the U.S. final manufacturing PMI is 50.9 vs 50.9 prior, while the ISM manufacturing PMI is expected to rise slightly from 49.2 to 49.8, but will remain in contractionary territory.

For Switzerland the consensus for the CPI m/m is 0.4% vs prior 0.3%, while the y/y data is expected to drop to 1.1% from the prior 1.4%. As a reminder last month’s data printed above expectations so it’s important to monitor this week’s print to assess if the trend continues.

SNB Chairman Thomas Jordan pointed out last Thursday at the Bank of Korea International Conference in Seoul that a weaker CHF has most likely contributed to rising inflation. The CHF has lost strength against other currencies since April and Jordan hinted at potential intervention if the franc continues to depreciate.

After his remarks the market now sees only a 40% chance of a rate cut in June compared with 65% previously since the Bank is more focused now on preventing excessive franc depreciation. That said, Jordan is well known for surprising the market so anything can happen at the next meeting, especially since better than expected GDP data increased the odds of a cut in the near future.

One of the highlights this week will be the BoC’s meeting. Economists’ opinions are split on whether the Bank will cut interest rates by 25 bps or not and analysts from Scotiabank argue that a hold is the most likely scenario as the Bank needs more time to assess how the economy is performing. The Fed delaying its own easing cycle may also play a role in the BoC’s planning.

Meanwhile, a rate cut is widely expected at this week’s ECB meeting. Analysts anticipate an upward revision on forecasts for growth and inflation, but the estimation on when inflation will reach the 2% target is likely to remain the same. ING analysts anticipate a hawkish cut from the Bank and believe that if inflation starts declining faster, other cuts will follow. But if inflation proves persistent and the economy shows signs of growth, the ECB could wait longer until the next adjustment. It’s unlikely the Bank will provide any forward guidance in its press conference.

In the U.S. all eyes will be on the labor market data after the PCE printed slightly below expectations last week. The consensus is for the average hourly earnings to rise by 0.3% vs 0.2% prior and the non-farm employment change to add 185K jobs compared to 175K last month. The unemployment rate is expected to remain unchanged at 3.9%.

Wish you a profitable trading week.

This article was written by Gina Constantin at www.forexlive.com.