Key Events: NFP to Show Labour Market Remains Tight

Key Events

G10

In the US, the main data releases are:

1. NFP – Friday. Consensus expects 185k and unemployment at 3.9% – i.e., a tight labour market still. I agree.
2. Trade balance – Thursday. A downside surprise to the consensus estimate of ‑$69.7bn would indicate a buildup of domestic demand pressures.
3. JOLTS – Tuesday. We expect continued declines in labour market flows and continued labour market rebalancing.
4. ISM PMIs – Manufacturing Monday, Services Wednesday. Consensus expects a small improvement in manufacturing to 49.9 from 49.2 in April and a larger one in services to 51 from 49.4 in April. Trade the PMIs using our event monitor.

Elsewhere in G10:

1. Japan Labour Cash Earning – Wednesday. Consensus expects 2.1% YoY from 2.2%. A beat would mean the tight labour market is translating to high wages. Also watch the core measure (‘scheduled full-time pay’): consensus is for a drop from 2.3% to 2%.
2. Switzerland CPI – Tuesday. Consensus expects headline to rise to +1.5% YoY from +1.4%, below quarter-end forecasts (+2%). This means a June cut is more likely than the market is painting. Elsewhere, watch imported inflation – Jordan threatened FX intervention if currency weakness leads to inflation.

EM

1. India elections – Exit polls 1 June, final result Tuesday. Markets expect NDA, the ruling coalition, to win 370-410 seats. A material downside surprise could hit risk sentiment; a result within or above expectations would be bullish Indian assets.
2. Mexico elections – Sunday. Results are due end of day. Frontrunner Sheinbaum commands a 20% lead over her rival. Expect limited market impact barring a major surprise.
3. Korea trade data – Saturday. Korea’s full month exports. Markets expect c.15%, slightly better than the workday-adjusted flash estimate of +12% YoY.
4. China trade data – Friday. Markets expect +12% YoY on China exports above its 3mma of +1%. A rise in container throughput and freight rates suggest a strong number, but expectations seem too high.
5. Mexico CPI – Friday. Headline should rise to ~4.8% YoY, but the focus is on core services CPI, which still hovers above 5% YoY and is a key concern for Banxico.

Central Banks in Action

1. ECB – Thursday. The ECB will ‘remove the top level of restriction’, according to Lane. A first cut from 4% to 3.75% is widely expected. We expect little forward guidance, with decisions meeting by meeting based on data. Room exists for small increases to GDP and inflation forecasts.
2. BoC – Wednesday. May’s dovish inflation data should enable the first cut against market pricing of a 65% chance. The labour market keeps loosening, with labour supply growing rapidly over the past year on increased immigration. But with wages rising 4.5% YoY, the BoC should be relatively hawkish, stressing wages must slow further to be consistent with their mandate.
3. Fed blackout – throughout week. The pre-meeting blackout started on the weekend.
4. Reserve Bank of India – Friday. A hold is expected at 6.5%. With real rates rising on moderating CPI (core now 3.25%), scope for cuts is rising. But RBI is likely to maintain a patient/on-hold stance.

Markets to Watch

• EUR/CHF dipped below 0.98, having flirted with parity just a week prior. Numerous warning signals lead us to see value in fading EUR/CHF rallies.

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