Weekly Macro Matters
Macro Matters – Weekly review, w/c June 5
The Fed is likely to “skip” a rate hike in June, shifting attention to July for potential action. Meanwhile, markets have moved past the debt ceiling crisis, fueling a risk-on sentiment. Key macro data, including ISM Services and jobless claims, will provide further market direction this week.
Macroeconomic / Geopolitical Developments
• The Fed is expected to “skip” a rate hike in June but could resume tightening in July.
• Investors are moving past the US debt ceiling crisis, boosting risk appetite.
Will the Fed “Skip” a Rate Hike in June?
As the Fed enters its pre-FOMC “blackout period,” recent dovish comments from officials suggest a likely pause in June. Market pricing reflects only a 25% probability of a June hike but a 62% likelihood of a hike in July, particularly following robust payrolls data.
Investors Ready to Move on From the Debt Ceiling
The resolution of the debt ceiling impasse has alleviated market stress. Equities have rallied, with US indices like the NASDAQ futures showing strength. However, exhaustion signals indicate potential pullbacks. Key support levels for NASDAQ futures include 14,250.
United States
• Nonfarm Payrolls outperformed expectations with a 144,000 beat, though unemployment and wage growth softened, indicating mixed signals for the Fed.
• ISM Manufacturing data points to a slowdown, with sharp contractions in new orders and prices paid, signaling recessionary trends.
• Lower volatility (VIX Index at 15) and reduced liquidity in equity markets suggest a cautious trading environment.
What’s Next?
Key data includes ISM Services (Monday) and weekly jobless claims (Thursday). Markets may remain subdued ahead of the FOMC meeting on 14 June.
Europe
• Eurozone inflation is trending lower, with core HICP at 5.3%, its first consecutive monthly decline since 2021. The ECB is expected to hike by 25bps, but future guidance is crucial.
• PMI data reflects slowing economic expansion, with minimal impact expected unless significant surprises emerge.
What’s Next?
Eurozone PPI inflation data may provide further clarity on disinflation trends, potentially weighing on the EUR.
Asia
• China’s economic slowdown persists, with weak official PMIs contrasting slightly positive Caixin data. The faltering recovery impacts global markets.
• The Reserve Bank of Australia could surprise markets with a hawkish move, as rising inflation pressures mount.
What’s Next?
China’s inflation data and the RBA decision will drive sentiment. Australian CPI remains a key factor for the AUD.
Commodities
• Oil: Prices have rebounded on improved market sentiment post-debt ceiling resolution, but resistance at $73.90/$75.75 remains critical.
• Gold: USD strength following strong payrolls data has weighed on gold, with resistance at $1970/$1985 and support levels under pressure.
On the Calendar
• 5 June: US ISM Services, Factory Orders
• 6 June: Reserve Bank of Australia monetary policy
• 7 June: Australian GDP, China Trade Balance, Bank of Canada monetary policy
• 8 June: US Weekly Jobless Claims
• 9 June: China CPI and PPI, Canadian Unemployment, US Treasury Currency Report
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