Weekly Forex Outlook from June 3rd to 7th – ECB and NFPs promise explosive week, and there is still Trump

Markets have digested the mixed results of the European elections before returning to a concentration on the niche market. And after? The first week of June is rich in major events, with the ECB's decision and report on non-farm payrolls standing out. Here are the highlights of next week.

Trade between the United States and China continued in full swing, weighing on sentiment. It went beyond the tariffs – which China has lifted this weekend as planned – and has become a threat for China to export rare earth and to prevent the United States from limiting the New business activity. In addition, Trump announced new tariffs on Mexico as a sanction to allow migrants to cross the border. Markets are watching his Twitter feed very closely. The European elections gave mixed results. While Italy and France have won victories for the populist parties, part of the votes from the majority parties has been won by the liberals and the Greens – pro-European parties. In the UK, Nigel Farage's Brexit party won but a trio of pro-Remain parties got a similar share of the vote, complicating the situation for the UK.

1. Chinese manufacturing PMI of Caixin: Monday, 1h45. China is the world's second-largest economy and Caixin's independent measure provides an up-to-date overview of the economy and how it is coping with US pressure. It has an impact beyond China's borders and tends to shape the general sentiment of the market. The indicator stood at 50.2 points in April and the May figure would likely fall below 50, which distinguishes the expansion from the contraction.
2. US ISM Manufacturing PMI: Monday at 14:00. The forward-looking indicator could indicate a decline from the mediocre 52.8 points observed in April. The number of May will be influenced by escalating trade tensions that began at the beginning of the month. On the other hand, the sector is The figure also serves as the first clue for Friday's NFP. A score of 53 is expected.
3. Australian rate decision: Tuesday at 16:30. The Reserve Bank of Australia is finally ready to change interest rates – for the first time since 2016. RBA Governor Phillip Lowe and his colleagues have hinted that they would reduce the rates of interest. Interest fairly quickly if inflation did not accelerate. In addition, the intensification of the trade war between the United States and China catches Australia in the middle. By adding the housing crisis, the Canberra-based institution has every reason to cut rates from 1.50% to 1.25%. Markets are likely to focus on the next step. Does Lowe plan to take even lower rates later this year? Or will he take his time before making another move? The answer to this question could be the key to the reaction in AUD / USD. Other countries will also look. Australia has not experienced a recession since the early 1990s and others could follow if the RBA was dovish.
4. Inflation in the euro zone: Tuesday at 9:00. Inflation resumed in the eurozone in April with 1.7% of the total and 1.2% of the core CPI. However, the lump can be solely related to what is known as the "Easter Effect" – the late moment of the Easter holidays. Core inflation was likely lower in May, paving the way for a more accommodating move by the ECB later in the week. Headline inflation is expected to fall from 1.7% to 1.4% and core inflation from 1.3% to 1%.
5. Australian GDP: Wednesday, 1h30. The Land Down Under suffered a sharp decline in growth in the fourth quarter of 2018 – only 0.2%. Economists forecast an expansion rate of 0.4% in the first quarter of the year. The RBA may have the data during its rate decision. If their comments on growth are wet, they could be lower. If they are optimistic, it could be higher.
6. US non-agricultural ADP payrolls: Wednesday 12:15. The private sector report published by Automated Data Processing, the largest payroll provider in the United States, is an index of non-farm wages. After an impressive increase of 275K in April, a more modest gain of 185K is expected in May. The numbers are not always perfectly correlated, but the number last month was very close – it could certainly shape expectations.
7. US ISM non-manufacturing PMI: Wednesday 14:00. The service sector is the largest in the United States and publication is an additional index for the NFP. After scoring 55.5 in April, a very similar number is expected for May: 55.6 points. However, the outbreak of the US-China trade war did not escape the minds of companies. A decline close to 50 indicating a slowdown can not be ruled out.
8. Decision of the ECB: Thursday, decision at 11:45, press conference of President Mario Draghi at 12:30. The European Central Bank is expected to release details of its new bank financing system called TLTRO. They have recently hinted that this would happen after Draghi announced it early in the year. A broad program can weigh on the euro, while a narrow program can boost it. However, the impact could be limited as new growth and inflation forecasts could steal the spotlight. While first quarter growth was optimistic compared to the previous two, no one thinks that Europe is out of the woods. The ECB could downgrade its forecasts. In addition, the intensification of trade wars between the United States and China also worries the ECB, which has already warned about their impact. Draghi and his peers can raise the bar. And when will it increase interest rates? The ECB has pledged to keep rates low until at least the end of the year, after the arrival of Draghi's successor. The board of directors of the Frankfurt-based institution may decide to postpone the date again. The markets expect a kind of fantasy, but their magnitude is unknown. Overall, look at the TLTRO, forecasts and forecasts for interest rates.
9. United States: non-agricultural employment: Friday 12h30. The monthly jobs report in the US does not trigger the same volatility as in the past, but this time may be different as it decisively contributes to the Fed's very important decision later this month. The Fed may be referring to a rate cut, but if the job market remains strong, it may not do it. After a huge increase of 263K posts in April, a return to normal – 180K – is to be expected. Salaries are no less important. The monthly wage growth forecast is expected at 0.3%, against 0.2% last time, while the annual number is expected to remain unchanged at 3.2%.
10. Canadian jobs: Friday 12h30. If the United States had a great month of April in the job market, in Canada it was superb. The number of people employed jumped 106.5K, comparable to some 800K in the United States. The unemployment rate is set at 5.7%, a surprise too. A more moderate increase is likely now.

* All times are GMT

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