Week Ahead
The US May PCE Index, rhetoric emerging from the World Economic Forum (Tue–Thu), and further developments surrounding the tentative US-Iran agreement will dominate the global macro agenda this week. In the UK, politics will be firmly in focus following Prime Minister Starmer’s resignation this morning.
Today brings the eurozone consumer confidence reading. We will hear from the ECB’s Kocher, and Fed Governor Waller is scheduled to discuss the international role of the US dollar. Tuesday’s focus shifts to a raft of global PMI releases and commentary from the World Economic Forum. Central bank speakers include the BoE’s Dhingra and Taylor, and the ECB’s Vujcic. On Wednesday, markets will digest Germany’s IFO business climate survey, together with US current account and new home sales data. Thursday delivers US personal income, the Fed’s preferred PCE price index, initial jobless claims, durable goods orders, and GDP readings. Friday’s line-up includes Japan’s CPI release, the ECB’s inflation expectations survey, and US advanced economic indicators and University of Michigan consumer sentiment figures.
Despite a holiday-shortened trading week in the US, markets experienced significant moves driven by geopolitical developments and economic data. Equities rallied on renewed optimism surrounding US-Iran peace talks, which eased fears of military escalation. The S&P Index gained 0.93%, while the US Treasury curve flattened, with the 10-year yield falling 3bps to 4.46% and the 30-year yield declining 7bps to 4.90%. The easing of geopolitical tensions also sent benchmark crude prices sharply lower, with Brent crude tumbling 7.74% to close the week near $80pb, a three-month low. Meanwhile, the DXY Index advanced 1.10% as a more hawkish Fed prompted markets to reprice interest rate expectations.
The FOMC left the federal funds target range unchanged at 3.50%–3.75% while adopting a notably more hawkish tone under new Chair Kevin Warsh. With inflation projections revised higher and policy messaging now centred exclusively on price stability, the Fed signalled a willingness to tolerate near-term economic weakness in order to address persistent inflationary pressures. This policy recalibration, coupled with ongoing reviews of the Fed’s framework and balance sheet, reinforced expectations of a higher-for-longer interest rate environment.
In China, recent economic data highlighted an increasingly pronounced dynamic of strong supply and weak demand. Export volumes and industrial production continued to underpin steady GDP growth, while domestic retail sales expanded only modestly as the effects of national consumption subsidies faded. At the same time, the prolonged property market downturn continued to weigh on fixed asset investment, prompting local governments to redirect infrastructure-designated bond proceeds toward debt reduction and property market stabilisation. Despite this backdrop, and a strengthening US dollar, the renminbi remained stable at ~6.77.
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