Key facts
- Key economic data releases including US CPI, Non-Farm Payrolls, and ISM Manufacturing PMI are scheduled.
- The European Central Bank and the Bank of Japan are expected to raise interest rates in June.
- The Japanese yen has approached 160 per dollar, leading to intervention warnings from officials.
- Federal Reserve Governor Jerome Powell warned that politicizing the central bank would erode public trust.
- South Korea's KOSPI index fell over 6%, and the won reached its weakest level against the dollar since March 2009.
- The People's Bank of China resumed liquidity injections but withdrew a net 682.7bn yuan for the week.
- The Reserve Bank of Australia is monitoring rising inflation expectations and the impact of higher rates.
- US dollar traded lower against the pound, euro, yen, and Canadian dollar ahead of jobs data.
- ECB policymakers indicated a strong likelihood of a rate hike ahead of the June 11 meeting.
- Traders are pricing in 80% odds for a Bank of Japan rate hike on June 16.
Global financial markets are anticipating a pivotal week marked by significant economic data releases and central bank policy pronouncements. In the United States, key economic indicators including Consumer Price Index (CPI) data, Non-Farm Payrolls, and the ISM Manufacturing PMI are scheduled, which will heavily influence the Federal Reserve's upcoming monetary policy decisions. Markets are closely watching for any shifts in the Fed's stance, with some anticipating a potential abandonment of its easing bias before the June Federal Open Market Committee (FOMC) meeting. Federal Reserve Governor Jerome Powell has also issued a warning against the politicization of the central bank, stating that such actions would erode public trust and undermine its decision-making capabilities. Powell, who recently concluded his term as Fed Chair, will continue as a governor, highlighting perceived ongoing threats to the institution's independence.
Across the Atlantic, policymakers at the European Central Bank (ECB) are signaling a strong likelihood of an interest rate hike. Comments from ECB officials, including Isabel Schnabel and Philip Lane, suggest that a June rate hike is probable to counter persistent inflationary pressures, with Lane anticipating an upward revision to the inflation forecast. The Bank of Japan (BOJ) is also poised for a potential rate hike in June, with traders pricing in a high probability for a June 16 increase, contingent on the absence of severe Middle East conflict escalation. Governor Kazuo Ueda has signaled a possible rate hike, citing inflationary risks stemming from energy shocks. The Japanese yen has touched lows near 160 against the dollar, prompting warnings from Japanese officials and the possibility of intervention.
In Asia, caution prevails in markets. South Korea's KOSPI index has experienced a significant downturn, falling over 6%, and the won has reached its weakest point against the dollar since March 2009. Hong Kong stocks have also declined amid tightened capital outflow controls. The People's Bank of China (PBOC) has resumed liquidity injections after a brief pause, though it withdrew a substantial net amount for the week. The PBOC has also set its daily mid-point reference rate for the yuan weaker than market estimates, signaling its managed float policy. Meanwhile, the Reserve Bank of Australia (RBA) is actively monitoring inflation expectations, which have shown an uptick not seen in years, according to board member Ian Harper. Governor Michele Bullock noted that while signs indicate policy tightening is slowing demand, the full impact of higher rates and energy price shocks is expected to materialize over the next one to two years. Citi reiterates its forecast for a 25 basis point RBA rate hike in August, citing persistent inflation.
The economic calendar for the week includes a light schedule on Monday, with employment trends data being the primary release. Wednesday and Friday are set to feature key inflation and employment reports, crucial for assessing economic trajectories and informing central bank policies. Thursday's calendar also includes inflation figures, employment data, and GDP updates. The US dollar has seen a modest decline against major currencies like the pound, euro, and yen ahead of the key employment data releases, with yields trading lower and US stocks showing mixed pre-market movements.