Industrial short‑squeeze or stabilization? Monday will decide
We will start the week with a strong blow to the US manufacturing sector, which can shake the market. Monday, June 1, will bring the release of the key indicator US ISM Manufacturing PMI for May and the final S&P Global data. Investors expect a consensus around 52.6‑53 points, after the April reading of 52.7. In the market, logic works absolutely – if trading algorithms record a result above expectations, the USD will get a powerful boost.
A stronger US economy means the Fed will keep its hawkish stance for longer. For the pair EUR/USD this is, in turn, a direct signal to move down. That day we will also see German retail sales, Swiss GDP and Chinese PMI, and the market climate further amps up the planned speeches of Fed bankers.
See also: The euro rate changed direction. The ECB could shake EUR/PLN and EUR/USD
The eurozone on the edge. The ECB is preparing heavy measures
On Tuesday, June 2, global capital attention will shift to the Old Continent. The eurozone CPI for May is undoubtedly the most important event of the day, generating huge emotions in the markets. Estimates point to headline inflation at about 3.3% year‑on‑year and core inflation in the range 2.2‑2.4%. For the ECB this is a key set of data before the upcoming meeting scheduled for June 10‑11.
The probability of a rate hike of 25 basis points reaches market forecasts of up to 95%, a direct effect of the energy crisis driven by geopolitical tensions in the Middle East. Higher inflation than forecasted will force the ECB to adopt a hard, restrictive rhetoric, immediately propelling the euro higher.
See also: The dollar rate in the midst of uncertainty. Expert: “It is impossible to completely rule out conflict escalation and a return to bombings”
US services and ADP and the NFP report closing the week
Wednesday, June 3, is the time when the US services sector will speak. The US ISM Services PMI and the ADP Employment Report on private sector employment are classic preludes to the Friday blow. If the services data and the ADP report prove strong, the USD will gain solid fundamentals for growth.
On Thursday we will only see Swiss CPI and eurozone retail sales, allowing traders to regroup forces and precisely position capital before the Friday play.
Friday, June 5, is the moment when market volatility will reach its apex. The Non‑Farm Payrolls (NFP) report and the US unemployment rate for May are the most important variables in the current Fed equation. After a weaker April, the market now expects a moderate job growth of +65,000‑115,000 and an unemployment rate of 4.4%.
If the NFP report surprises positively, the USD will literally crush the competition, definitively boosting hopes for rapid rate cuts during the June FOMC meeting (June 16‑17).
Although the world’s main currency pair currently oscillates around 1.16‑1.17, the upcoming week still has technical potential to generate powerful volatility. The hawkish ECB is already partially priced in, but in the case of strong US data and low European inflation, the bears will quickly take control, pushing the EUR/USD rate sharply down.
Chart. Euro to dollar rate (EUR/USD)
Source: Trading Economics
See also: Will the dollar surprise again? The expert issued a forecast for USD/PLN and EUR/USD. “It’s hard for me to believe there will be no more fires”
Source: CNBC
