The US CPI release for May and the ECB rates decision will be the focus for the week – both on Thursday. It will be a quiet week for US Fed speeches in the lead-up to the FOMC meeting next week.
Estimates for the increase in US non-farm payrolls last week were varied. While the 559k increase was below the median expectation (650k), it was still an improvement on the month prior. The household survey indicated that the unemployment rate declined further in May – this was (equally) the result of higher employment growth, but also a fall in participation. With payrolls, employment, and participation still well below pre-Covid levels, it is hard to see that “substantial further progress” has been made in the labour market yet.
The main highlights this week will be:
The headline US CPI growth is expected to be 4.7% in May (up from 4.2% in Apr). Annual growth in core CPI is expected to be 3.4% (up from 3% in Apr). There will be a smaller base effect in the annual CPI calculation this month. From June, the base will shift higher.
Other reports of note for the US will be the University of Michigan consumer sentiment survey for early Jun, JOLTS for Apr, and the consumer credit change for Apr.
The ECB will meet on Thursday and there are no changes expected in policy or rates. Vaccination rates have started to increase more notably throughout Europe, supporting an improvement in the short-term outlook. The ECB is expected to maintain the current pace of (PEPP) QE through the summer to support the recovery.
Data out of China includes trade, CPI, and PPI for May.
This week, the US Treasury will settle $266bn in ST Bills, with a -$19bn net paydown for the week. The net new cash raised for the quarter-to-date is approx. $100bn (est of $463bn).
The US Treasury will also auction the 3yr Note, 10yr Note, and the 30yr Bond this week – raising approx. $99bn in new cash. These auctions will settle on 15 Jun.
This week, approx. $16bn in ST Bills 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
