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On Wednesday a preliminary agreement between the USA and Iran was published. The memorandum presents the full text of the agreement reached last Sunday, including key provisions regarding actions to be taken before a final peace agreement is established, such as the immediate and permanent cessation of hostilities (also by allies of both sides) and the unlocking of the Strait of Hormuz.
As a result, last week it was already possible to observe an increase in the number of tankers passing through the Strait. However, this number is still significantly lower than the level before the conflict erupted. The memorandum also contained a number of further important agreements that are to be specified and implemented as part of the final agreement between the USA and Iran.
It includes, among other things, the end of Iran’s nuclear weapons program, the complete lifting of US sanctions against Iran, the unlocking of frozen Iranian funds, and a reconstruction program for Iran worth $300 billion. A key issue not addressed in the memorandum is the possibility for Iran to charge fees for passage through the Strait of Hormuz after the 60‑day period specified in the memorandum.
Direct talks scheduled for Friday between Iranian and US representatives were expected to provide further information, but were postponed due to the resumption of hostilities between Israel and Lebanon. In response to the escalation, Iran announced on Saturday that it would again close the Strait of Hormuz.
Further escalation of hostilities contrary to the terms of the agreement, as well as significant differences in the interpretation of the memorandum’s provisions between the parties, remain the main risk factors for the success of peace talks, which are likely to lead to increased volatility in financial markets.
Today a set of data from the Polish economy for May will be published. We forecast that the dynamics of construction and assembly production increased to 6.5% YoY compared to 4.5% in April, indicating a continuation of gradual growth in construction activity.
For labour market data we expect an acceleration in wage growth in the corporate sector to 6.0% YoY in May from 5.4% in April, mainly due to low‑base effects. We expect the pace of employment decline to remain at 0.9% YoY, reflecting both the ongoing retirement of workers and the still limited demand for labour in industrial processing.
We expect the dynamics of retail sales in constant prices to have increased to 3.1% YoY in May versus 1.3% in April, which we believe is due to the fading of the negative Easter shift effect and sustained consumer confidence.
Our retail sales forecast is below market consensus (3.6% YoY) and its materialisation would be slightly negative for the zloty and the yield of Polish bonds.
On Tuesday preliminary PMI business‑sentiment results for the euro area for June will be published. According to market consensus, a modest rise in the composite PMI index to 49.1 points from 48.5 points in May is expected, meaning the indicator would remain below the 50‑point threshold separating growth from contraction.
The data structure will likely remain sector‑diversified – the PMI in services is expected to rise to 48.5 points from 47.7 points, the third month on the government side staying below 50 points, while the PMI in manufacturing is expected to remain at 51.6 points, staying above 50 points. A stabilising factor for manufacturing is the lengthening of delivery times, which, according to the index construction, drives its rise.
Publishing the PMI indices will allow assessment of whether the negative effects of the energy shock, rising costs and supply‑chain disruptions observed in previous months have eased with the de‑escalation in the Middle East, which would favour increased economic activity in the euro area.
On Thursday inflation data for the USA will be released. We expect the overall PCE inflation to have risen in May to 4.1% YoY from 3.8% in April, reflecting the growing pro‑inflationary impact of the energy shock related to the war in the Middle East.
At the same time we forecast that core PCE inflation increased to 3.4% YoY in May from 3.3% in April, meaning its rise was clearly smaller than overall inflation.
This PCE inflation structure would strengthen the argument for keeping rates unchanged for a longer period. Our baseline scenario still assumes rates remain unchanged until early 2027 and one cut in Q2 2027.
The scale and durability of the commodity shock are large enough that a one‑off “signal” tightening by the Fed in 2026 cannot be ruled out.
