As the curtain closed on the previous week, the market encountered hurdles, leading to a significant erosion of gains. Despite this setback, the ongoing earnings season is gradually winding down, albeit with a few reports still expected.
Looking ahead to the current week, anticipation mounts as a plethora of pivotal events loom on the horizon. From Monday's PMI data to upcoming job reports and Non-Farm Payrolls later in the week, a flurry of significant developments is set to unfold.
Here are five key highlights to monitor closely in the market this week.
🇺🇸 ISM Manufacturing PMI — June 3, at 17:00 GMT+3
This week's key release is the ISM Manufacturing PMI, anticipated to match the previous reading of 49.2. This index provides insight into the health of the manufacturing sector. Expectations around this figure will likely center on the US Dollar's response, as well as stock indices like the Dow Jones, Nasdaq, and SPX500.
These indices have been cooling off after a rally in the first half of May, so their reaction to the PMI data will be closely watched.
🇺🇸 JOLTS Job Openings — June 4, at 17:00 GMT+3
The focus remains on the labor market, a key factor in both inflation and rate discussions this year. Tuesday's release of JOLTS Job Openings provides a direct insight into labor market strength. If the data shows fewer job openings, indicating a softening labor market, it could trigger a market rally.
Conversely, if job openings exceed expectations, signaling a robust labor market, the market might react differently, acknowledging the ongoing strength of the US economy. Either scenario could influence the upcoming Fed Funds rate release later this month.
As for the EUR/USD pair, it may test the upper boundary of an ascending triangle, approaching the key level of 1.0900. Meanwhile, gold prices are consolidating near two-week lows of $2,321, setting a cautious tone for the week ahead.
🇨🇦 BoC Interest Rate Decision — June 5, at 16:45 GMT+3
The Bank of Canada will announce its interest rate decision on Wednesday. The current key interest rate target is 5%. Governor Tiff Macklem has mentioned the possibility of a rate cut, depending on economic data.
In anticipation of this, the USD/CAD pair is trading slightly bearish around 1.3625. Weaker Canadian GDP growth in the first quarter led to the Bank of Canada's first interest rate cut. The Canadian economy expanded by 1.7%, below the estimated 2.2% and the central bank's forecast of 2.8%. Alongside the disappointing GDP data, the Canadian Dollar is also affected by falling crude oil prices, as Canada is a major oil exporter to the United States.
🇪🇺 ECB Interest Rate Decision — June 6, at 15:15 GMT+3
Despite ECB President Christine Lagarde's groundwork for a June reduction in benchmark interest rates, recent sentiment about the future rate trajectory has significantly tempered.
A May 28 report from the economics team states, "A 25 basis point cut on June 6 appears inevitable. The ECB's April 11 meeting and subsequent declarations by its officials have sent clear signals: they are poised to lower rates by 25bp to 3.75% at their upcoming June 6 meeting."
The analysts believe that even the underwhelming May inflation data (set for release on May 31) won't sway the ECB's decision. However, they are certain that market participants will closely parse Lagarde's press conference and the ECB staff's updated macroeconomic projections. Their focus will be on discerning signs about the rate cut tempo post-June, particularly the possibility of a second reduction at the July 18 gathering.
Further affirmation of the June 6 rate cut came recently from ECB executive member Philip Lane. In a May 27 Financial Times interview, he stated, "Absent any significant surprises, our current assessment suggests it's time to withdraw the maximum level of tightening."
🇺🇸 Nonfarm Payrolls — June 7, at 15:30 GMT+3
This Friday's employment report will be under intense scrutiny as investors hunt for clues about potential interest rate reductions ahead of the Federal Open Market Committee (FOMC) meeting the following week.
The May job figures arrive as several Federal Reserve officials have been emphasizing the central bank's "dual mandate" — a commitment to simultaneously curb inflation and maintain low unemployment rates.
Last month's payroll data revealed a deceleration in hiring, with only 175,000 jobs added, falling short of economists' projections. Concurrently, the unemployment rate inched up to 3.9%. Some market observers found this slowdown encouraging, interpreting it as a possible sign that inflationary pressures are beginning to ease.
That's it for this week! 👋
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