The week ahead will some important economic releases that will no doubt fuel speculation for the upcoming central bank decisions in June.
Wage and price data will most likely influence the FOMC and the ECB meetings coming up later during the month. It will be an especially busy week in the US starting Thursday as the markets move into a new trading month.
ISM and NFP could cement rate hike expectations for June FOMC
The FOMC meeting is scheduled for June 13 – 14. Currently, the markets are pricing in an 80% chance of a rate hike in little under two weeks. However, these expectations could either make or break the rate hike expectations.
The week ahead is relatively quiet from the US, but starting Thursday, fresh economic reports for the month of May begin to unfold, starting with the Institute of Supply Management (ISM) manufacturing PMI report.
The manufacturing activity has been on a backfoot after posting strong gains earlier this year. Median estimates expect that the manufacturing activity cooled even further, but falling to 54.7, which still signals an expansion in the sector. In April, the ISM manufacturing PMI was at 54.8.
On Friday, the monthly payrolls report will be released. Forecasts point to a recovery in the payrolls numbers with the average jobs seen rising 186k. This is slightly lower than April’s gains of 211k. However, wages continue to remain at the forefront.
Expectations are slightly hawkish with forecasts pointing to a year over year wage growth at the pace of 2.7%. The US unemployment rate is expected to stay put at 4.4%, same as in April when the unemployment rate fell from 4.5%.
Last but not the least, the Personal Consumption Expenditure (PCE) data is expected to slip from 1.8% in April to 1.7% in May, while the core PCE is expected to slide to 1.5% from 1.6% previously.
Eurozone flash inflation estimates
As the European Central Bank is also scheduled to meet later in June, the economic data this week will be of importance as the ECB comes under pressure to cut back on its easy monetary policy.
Among the data scheduled from the eurozone next week, the flash inflation estimates for the month of May will stand out. Oil prices have pulled back from the previous highs which could result in the inflation figures taking a step back.
Headline inflation estimates in the eurozone are expected to slip to 1.5%, down 0.4 percentage points from April’s 1.9%, while the core inflation rate is projected to slip to 1.0%, down from 1.2% previously.
The pullback in inflation is expected to come because the fading Easter effects which contribute strongly to inflationary pressures around the month of April. If inflation eases back, it could potentially keep policy makers from giving any signals to change monetary policy.
Ahead of the Eurozone flash inflation estimates coming out on Wednesday, Germany, and Spain will be releasing the regional inflation estimates which will provide early clues into how consumer prices behaved during May.
UK manufacturing PMI
The manufacturing PMI numbers from the UK this week is due on Thursday. In April, manufacturing activity rose to a three-year high unexpectedly. The surprise data hinted that British firms continued to enjoy the tailwinds from a weaker exchange rate.
The forecasts for May is however expected to show that the manufacturing PMI might have eased back from the three-year high, to 56.5, down from 57.3 that was registered a month ago.
The data is, however, unlikely to do much for the British pound as the currency heads into the election month, where politics are likely to trump the economic data in the near term.
