Macroeconomics: The Day Ahead for 3 June

The day’s schedule of statistics and events is not without its highlights, but these may struggle to get more than passing attention as trade tensions, national and geopolitics continue to rule the market sentiment roost. The final key components of Australia’s Q1 GDP via way of Current Account, Inventories and Govt Spending and Swiss CPI are to be digested ahead of Eurozone provisional CPI and Unemployment, South Africa’s Q1 GDP, US JOLTS Job Openings, Auto Sales and Factory Orders. On the events front, there is the overnight South Korea Presidential election, BoE MPC testimony on the Q2 Monetary Policy Report, OECD Economic Forecast update, as well as further central bank speakers. By way of an aside, there is not much attention being given to the fact that China’s ShFE will this report on its call for feedback on opening internataional access (which is currently complex and cumbersome) to its commodity exchanges. It is notable as thanks to the enormous retail participation, volumes are much higher than in the US or elsewhere, and per se in a world of shifting capital and trade flows, this could have a substantial impact on price formation in the commodities sector, and shift the focus from purely looking at Chinese demand for resources and commodities. Be that as it may, after a lot of hopeful noises, the US/Iran nuclear negotiations appear to have hit an intractable impasse, marking another failed initiative to reduce regional geopolitical tensions, as has been the case with Ukraine / Russia war and the conflict in Gaza. BoE’s Mann comments that the BoE’s quantitative tightening programme needs to be reviewed, above all givne the impact on long-term yieklds, is hopefully a signal that the BoE is ready to move, and it will be interesting to note if there are any questions about that at today’s MPC testimong to the Treasury Select Committee.

** Eurozone – May CPI **

– As with the Swiss CPI earlier today, falling energy prices and currency strength will likely be the primary drivers of an expected flat m/m headline reading which would see the y/y rate hit the ECB’s 2.0% Trget (vs. prior 2.2%), and more significantly to 2.4% y/y from 2.7% on the core measure, echoing national readings last week. That along with sharp drop in negotiated wage settlements (2.4% y/y), continued downward pressure om energy prices, and the downside risks to growth from global trade tensions will also underpin that decision, will reinforce expectations of a further bps rate cut on Thursday.

** U.S.A. – April JOLTS Job Openings / May Auto Sales **

– The run of US labour indicators dominates this week, and perhaps offer the strongest indications about how businesses are dealing with the lack of visibility on the economic outlook. While frequently quite heavily revised, JOLTS Job Openings continue to point to a persistent loosening in labour demand, with a further drop to 7.100 Mln from 7.192 Mln expected, matching September’s recent cyclical low, but at the top of the pre-pandemic range. If forecasts are correct, the run of indicators are likely to reinforce the Fed’s cautious ‘wait and see’ stance. Given last year’s misread of the labour market that prompted the overly hasty 50 bps initial rate cut, the FOMC will probably be rather more cautious in reacting to any tentative rather than significant weakening in labour market indicators. Auto Sales are expected to ‘mean revert’ to 16.0 Mln after two months of way above trend readings of 17.27 Mln and 17.77 Mln as consumers rushed to beat tariff related price increases, thus far pass through on auto prices has been non-existent (as per CPI sub-indices), and will likely materialize in H2, once pre-tariff inventories have been depleted.