This week’s data and event calendar starts off reasonably light but is due to get heavy from Wednesday onwards.
At a global level, Friday is potentially a pivotal day with US President Trump due to announce his decision on whether to introduce tariffs on imports from the European Union, Canada and Mexico. Major economies will also release May manufacturing PMI numbers, a useful forward indicator for the broader measure of GPD growth. Finally, President Trump and North Korean leader Kim Jong un may at last provide clarity as to whether their scheduled meeting on 12th June will go ahead.
While it’s a reasonably light week for the Eurozone and in particular the UK, the US is due to release May ADP non-farm employment numbers, the second release of Q1 2018 GDP, April personal income, spending and price indices and May labour market data. Markets last week significantly dialled down their expectation that the Federal Reserve will hike rates three more times this year and US macro data would likely have to point to robust underlying inflationary pressures for markets to once again price a more hawkish Fed rate-hiking scenario.
In the Eurozone, May CPI-inflation data may get some attention but the travails of Italian politics are likely to remain the headline grabber. Italian President Mattarella is expected to announce a technocratic stop-gap prime minister until new elections are held, potentially this autumn.
In Switzerland, analysts are forecasting robust Q1 GDP growth which would likely underpin the Swiss Franc’s recent resurgence and may prompt a slight change of view by the Swiss National Bank of Switzerland and Chairman Jordan.
Monday 28th May
Public holiday: United States, United Kingdom
Tuesday 29thMay
United States: FOMC members Bullard speaks
United States: May Conference Board Consumer confidence index. This measure of consumer confidence, which has been on an up-trend since mid-2015, has correlated quite closely with the rise in US retail sales growth to about 4.7% year-on-year in February-April. A further up-tick in consumer confidence in May from 128.7 in April would bode well for retail sales which are now nearing $500bn per month.
Eurozone: European Central Bank board members Mersch and Lautenschlaeger speak. ECB board members tend to stick to script and the ECB has been reasonably consistent in its view that momentum in economic activity has slowed in recent months while political uncertainty has risen and that it will continue to pursue policies which support economic growth medium-term. Mersch and Lautenschlaeger are unlikely to answer the important question of whether the ECB will extend its QE program beyond September.
Wednesday 30th May
United States: May ADP non-farm employment change. This measure of private-sector employment is seen as an important precursor to the official US non-farm payrolls data which are due on 1st June. Consensus forecast is for another solid increase in employment of 186,000 in May, following a 204,000 rise in April.
United States: Q1 2018 GDP (second estimate). GDP growth slowed to a still decent 2.3% quarter-on-quarter annualised in Q1 according to the advance estimate and analysts expect little or no revision to this number. Of more interest to markets and the Federal Reserve will be how GDP growth fared in Q2 with the GDP advance estimate due for release on 27 July 2018.
Switzerland: Swiss National Bank (SNB) Chairman Thomas Jordan speaks. The SNB has said little about the Swiss Franc’s recent resurgence with Jordan having argued on 20th April that the SNB saw no immediate reason to alter its ultra-loose monetary policy stance.
Thursday 31st May
Switzerland: Q1 2018 GDP. GDP growth has been reasonably stable around 0.6% qoq in the past three quarters which pushed year-on-year growth to a three-year high of 1.9% in Q4 2017. Analysts’ consensus forecast is for 0.5% qoq in Q1 which would take year-on-year growth to about 2.3%. This would in turn confirm that the turnaround in the Swiss economy is ongoing and may at the margin provide further support for the Swiss Franc.
United Kingdom: May Nationwide Housing Price Index. House prices have only risen 0.4% since end-2017 according to the Nationwide but were still up 2.6% in April from a year ago. House prices are one of many factors which can influence consumer confidence and in turn household consumption.
Eurozone: May CPI-inflation. Core CPI-inflation slowed to a two-year low of 0.7% yoy in April while headline inflation (1.2% yoy) was at the bottom of a 17-month range despite stronger economic growth and higher international energy prices. Modest real wage growth in the Eurozone has seemingly capped inflationary pressures and the ECB’s discourse has as a result become somewhat more dovish in recent months. Analysts forecast core and headline CPI-inflation to have bounced back to 1.0% yoy and 1.6% yoy, respectively, in May. But a sustained pick-up in Eurozone inflation is a likely necessary if insufficient precondition for the ECB to become more hawkish and ultimately for the Euro to resume any kind of upward trend.
United States: April personal income, spending and price index. Focus will likely be on the measures of headline and core PCE price inflation which both rose sharply in March. However, analysts expect core PCE inflation – a measure which the Federal Reserve tracks closely – to have edged lower to 1.8% yoy from 1.9% yoy in March. Evidence that underlying US inflation is at most rising only slowly would likely reaffirm market expectations that the Federal Reserve will only hike rate two more times this year.
United States: FOMC members Bostic and Brainard speak
Friday 1st June
Global: May Manufacturing Purchasing Manager Indices. Major economies, including the US, Eurozone and UK, will publish May PMI numbers for the manufacturing sector, providing a more detailed picture of economic growth in May at a country and global level.
United States: President Trump to decide whether to introduce tariffs on imports of steal and aluminium from the European Union, Canada and Mexico. The threat of protectionist policies has arguably weighed on Eurozone business confidence and by extension the Euro which is at the bottom of a narrow two-month range in trade-weighted-terms.
United States: May labour market data. Headline numbers point to a US labour market nearing full-employment with the unemployment rate at a multi-decade low of 3.9%. However, while aggregate payrolls growth – the product of wage and employment growth – has inched up to 5% yoy, in real terms it has only been half as fast due to inflation of around 2.5% yoy. The question is whether the strength of the labour market will start feeding through more forcefully to faster wage and aggregate payroll growth, consumer demand and in turn inflation. With the Federal Reserve having recently indicated that two, rather than three more hikes will be necessary before year-end, US wage and inflation data would likely have to strengthen considerably for the Fed to re-open the door to a possible three-more-hikes scenario and give the Dollar rally a fresh new impetus.
United States: FOMC members Kaplan and Kashkari speak.
