It will be a big week of data, central bank speeches, the RBA rates decision, and OPEC.
Markets currently expect US inflation to be transitory and are looking through the higher prints as we cycle over the low points of consumer inflation last year. The latest Apr US PCE data was the last of the lower base readings from 2020 – the 2020 base will start to increase from May. The latest PCE trimmed mean shows that underlying inflation continued to increase from 1.71% in Mar to 1.79% in Apr (annualized) – but remains well below recent peaks of 2.1% in Feb 2020.
The main highlights this week will be:
US non-farm payrolls for May will be the focus – especially after the much weaker than expected Apr result. Expectations are currently for a +650k increase in May (prior actual was +266k increase in payroll jobs in Apr and a substantial downward revision to the Mar result).
US central bank speeches including Chair Powell, Vice Chair Quarles, and Governor Brainard.
US ISM Manufacturing and Services PMI’s for May – while ongoing expansion of demand is expected especially in Services, the prices, delivery lead times, and unfilled orders indexes will also be in focus, providing some insight into any easing of supply chain disruptions and input price pressures.
The RBA meeting on rates. While no change in rates is expected, the RBA is expected to provide commentary on the TFF which is due to wind-up on 30 Jun. Commentary is expected to remain focused on reducing labour market spare capacity before any change in rates. Labour market outcomes are likely to be made worse by another state-wide lockdown in Victoria (second-most populous state) – just as National support programs have ended.
Australia Q1 GDP will be released. Growth in Q1 is expected to have slowed slightly to +2.5% (from +3.1% in Q4 2020).
There will be several other central bank speeches this week: ECB President Lagarde, RBNZ Governor Orr, BoE Governor Bailey, and the Indian central bank will also meet this week.
OPEC will meet this week:
OPEC and its allies are expected to stick with a decision to boost output in July when the group gathers Tuesday, according to a Bloomberg survey last week. https://www.bloomberg.com/news/articles/2021-05-30/oil-edges-higher-with-market-set-to-focus-on-opec-policy-meet
This week, the US Treasury will settle $476bn in ST Bills, Notes, and Bonds, raising approx. $91bn in new money. The net new cash raised for the quarter to date is approx. $119bn (est of +$463bn in Q2). This week, approx. $62bn in ST Bills and Notes & Bonds will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
