The corporate diary is pretty bare but there is plenty on the macro front to look forward to. Here’s our look ahead at some of the biggest events for the markets this week.
US Nonfarm Payrolls
Jobs growth bounced back in April following a pretty lacklustre performance in March, stiffening expectations that the Federal Reserve faces few obstacles to raising rates at its June meeting.
With the FOMC convening in a fortnight’s time for that crunch decision, Friday’s nonfarm payrolls (NFP) will be as closely watched as ever for clues about how strong the US economy appears.
Weighing on any positivity in the report are renewed doubts about the reflationary policies of president Trump, which has forced two of the biggest investment banks to trim their bond yield forecasts for 2018. Nevertheless, the monthly NFP release should provide all the usual volatility in US Treasuries, the dollar and equity markets. The private ADP nonfarm report on Wednesday will also be keenly awaited as it can give clues about the official data release two days’ later.
The German powerhouse rumbles on. Germany business confidence hit a record high last week amid signs of a welcome surge in activity in the Eurozone’s largest economy. Attention this week shifts to inflation figures, with German CPI data released on Tuesday, followed by flash inflation estimates for the Eurozone on Wednesday.
The inflation data will be watched especially closely by euro traders as it comes shortly before the European Central Bank’s meeting next week. Rising inflation and growth, combined with receding political risk, is putting pressure on the ECB to consider tightening monetary policy faster than planned. Investors are already acting, with EURUSD climbing to multi-month highs in recent days. A big spike in underlying CPI inflation could send the euro higher if the ECB does seem minded to act.
The upcoming General Election is likely to offer continued interest for traders as sterling flirts with an eight-month high around $1.30. Recent polls showing a Labour surge suggest Theresa May’s Conservative party might not be a shoo-in for a thumping majority. If Labour continues to narrow the gap expect heightened volatility in sterling pairs, with the pound exposed to political risks associated with Brexit negotiations set to start just a week after the June 8th poll.
Meanwhile, the monthly series of PMI reports will provide more clarity about the pace of growth in the economy amid signs that the pace of expansion may be slowing. Manufacturing and construction surveys are due out on Thursday and Friday respectively, with the all-important services sector report coming the following Monday.