The Week Ahead – US Jobs Report Could Seal a Fed Rate Hike

On the Macro

It’s a quieter week ahead on the economic calendar. However, several key economic indicators will move the dial, with the US Jobs Report the main report of the week. From the weekend, reports of US President Joe Biden and Speaker of the House Kevin McCarthy reaching a debt ceiling deal will fuel demand for riskier assets.

For the Dollar:

Consumer confidence figures for May will kickstart the week. While inflation remains sticky, labor market conditions are tight supporting sentiment. However, the US debt ceiling crisis may test confidence.

On Wednesday, JOLTs job openings will also move the dial ahead of ISM Manufacturing and initial job claims on Thursday.

While the numbers will draw interest, the US Jobs Report will have the final say, with wage growth and nonfarm payrolls being the focal points.

For the EUR:

It’s a busy week for the EUR. Prelim inflation numbers for May and private sector PMI numbers will be in focus.

Prelim inflation numbers for Spain (Tues), France (Wed), and German (Wed) will move the dial. A pickup in inflationary pressure would fuel bets of a more hawkish ECB facing economic uncertainty.

French GDP (Wed), German unemployment (Wed), and German retail sales (Thurs) also need consideration.

However, Eurozone inflation and the manufacturing PMI numbers on Thursday will likely have more impact.

With inflation in focus, investors should also consider ECB commentary. Executive Board member Andrea Enria (Thurs) and ECB President Christine Lagarde (Wed/Thurs/) are on the calendar to speak.

For the Pound:

It is a quiet week ahead for the Pound. Finalized manufacturing PMI numbers for May will draw interest on Thursday. However, barring a downward revision, the PMI should have a limited impact on the Bank of England following the April wage growth, inflation, and retail sales figures.

With the economic calendar on the light side, Bank of England commentary will influence. Monetary Policy Committee member Catherine Mann is on the calendar to speak on Wednesday.

For the Loonie:

It is an important week ahead on the economic calendar for the Loonie.

GDP numbers for Q1 will draw interest on Wednesday. Better-than-expected GDP numbers would support a Loonie breakout. However, crude oil inventories and sentiment toward the global economy will likely remain the key drivers.

Out of Asia

For the Aussie Dollar:

It is another quiet week for the Aussie Dollar. Housing sector and private sector credit figures will be in focus in the first half of the week. However, barring a sharp deterioration in credit conditions or a marked decline in real estate sector-related stats, the numbers should have a limited impact on the RBA and the Aussie.

For the Kiwi Dollar:

For the Kiwi Dollar, it is also a quiet week ahead.

Building consents will be in focus ahead of business confidence numbers on Wednesday.

We expect business confidence to have more impact, with the RBNZ interest rate hikes likely to test sentiment as concerns over the Chinese economy grow.

For the Japanese Yen:

It is a quiet week for the Japanese Yen. Industrial production and retail sales figures will draw interest on Wednesday. Following the private sector PMI and core machinery order numbers, the stats on Wednesday will need to impress to support a Bank of Japan tweak to ultra-loose.

On Thursday, finalized manufacturing PMI figures and capital spending numbers for Q1 should have a limited impact on the Yen.

Out of China

Private sector PMIs on Wednesday and Thursday will influence market risk sentiment. The PMIs will give the markets a gauge of how the Chinese economy is performing in Q2. With growth concerns resurfacing, weak numbers would weigh on market risk appetite.

Economists forecast the all-important Caixin Manufacturing PMI to increase from 49.5 to 50.3.