Forex Major Currencies Outlook (Jun 9 – Jun 13)
Inflation from the US and China, employment from the UK, final Q1 GDP from Japan and trade balance data from China will highlight the week ahead of us.
USD
ISM manufacturing PMI in May printed 48.5 vs 49.5 estimate and down from 48.7 in April. This is fourth consecutive month of declining numbers as the reading is slowly moving further down into contraction. Digging into details we see a better looking picture as production, new orders and employment all improved on the month. Prices paid component declined slightly. Big drops were seen in inventories, new export orders and imports.
OECD has reduced global GDP to 2.9% for 2025 and 2026 from 3.1% and 3% respectively citing trade barriers and tighter monetary conditions as main reasons. Inflation outlook for the world was revised down to 3.6% from 3.8% previously but for the US it has been revised up to 3.2% from 2.8% previously.
US has extended tariff pause on some goods from China through August 31. Trump and Xi held a phone call meeting during the week and agreed to start a new round of trade talks. Meetings are expected to start next week. We also got a breakup between Trump and Musk. It got ugly with Musk saying Trump tariffs will cause recession in latter part of 2025 with Trump saying Musk “disappointed”. Tesla shares were down double digits after the war of words on social media. The rhetoric died down as the week came to an end and there was a kind of truce established between the parties.
ISM services printed 49.9 in May vs 52 as expected and down from 51.6 in April. Although it is as close as 50 as possible this is the first time services fell below 50 since June of last year. Positives include employment returning to expansion. Negatives are big drop into contraction for new orders (first negative reading in a year), increase in inflationary pressures as suggested by prices paid component. Business activity declined hard but managed to pull our exactly 50 print.
April trade balance showed deficit shrinking sharply to -$61.6bn from -$138.3bn in March. Exports rose by 3% while imports plunged -16.3% as tariffs stepped in and all import front running was done in the previous month.
NFP May report sawed mixed signals. Headline number came in at 139k vs 130k as expected but previous month’s number was revised down (147k vs 177k). The unemployment rate remained unchanged at 4.2% but when calculated to the third decimal it printed 4.244%, almost 4.3% and up from 4.1872% in April. Participation rate dropped to 62.4% from 62.6% the previous month. Wages continued to rise coming in at 0.4% m/m vs 0.3% m/m as expected and 3.9% y/y vs 3.7% y/y as expected. Healthcare added the most jobs, 62k, followed by 48k in leisure and hospitality. Federal government employment fell by 21k jobs. Overall, this should push rate cuts further into the future.
The yield on a 10y Treasury started the week at 4.40%, rose to 4.52% and finished the week at around 4.51%. The yield on 2y Treasury started the week at 3.91%, rose to 4.05% and finished the week at around 4.04%. Spread between 2y and 10y Treasuries started the week at 50bp and finished the week at 47bp as curve bear flattened. FedWatchTool sees the probability of a 25bp rate cut at June meeting at around 1%, while probability of a no cuts is around 99%. September is now the first month with greater than 50% probability of a rate cut. Gold has again reached $3400 during the week while S&P touched 6000. Silver has crossed $36.
This week we will have May inflation data, expected to show a slight increase.
Important news for USD:
Wednesday:
- CPI
EUR
Final manufacturing PMI for the month of May was unchanged from preliminary reading at 49.4 but improved from 49 in April. The report showed production increasing across all major economies, although overall PMI number showed a tick down in Germany while it improved nicely in France. Final services were lifted up to 49.7 from 48.9 a preliminary reported getting so closer to the expansion after printing 50.1 in April. French and Italian readings were revised up while German and Spanish readings were revised down. Positive revisions helped composite stay in expansion with a 50.2 print. It has been in expansion for every month of 2025.
Preliminary May inflation data for the Eurozone saw headline number drop to 1.9% y/y from 2.2% y/y in April while a 2% y/y print was expected. Monthly reading showed no change in inflation. Core reading dropped to 2.3% y/y from 2.7% y/y the previous month while markets were bracing for a 2.5% y/y print. Services inflation dropped again after rising in April and is now sitting at 3.2%. This is the first time inflation printed below the 2% target since September and it cemented a 25bp rate cut. Final Q1 GDP number was revised up to 0.6% q/q and 1.5% y/y from 0.4% q/q and 1.2% y/y as seen in second estimate.
ECB has cut interest rate by 25bp as was widely expected and brought it to 2%. This is eighth cut rate in a year and it is now at the lowest level since December of 2022. Inflation is coming down and according to most measures it will settle down around targeted 2% level. ECB will not pre-commit to a particular rate path and will instead keep data-dependent, meeting-by-meeting approach. New inflation projections see headline inflation averaging 2% in 2025, 1.6% in 2026 and 2% in 2027. Core inflation is seen averaging 2.4% in 2025 and 1.9% in 2026 and 2027. Real GDP is seen averaging 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027.
ECB president Lagarde stated at the press conference that she will stay at the helm of ECB till the end of her mandate. She added that risks to growth are tilted to the downside and that services sector is slowing. She clarified that ECB is getting closer to the end of the cutting cycle but added that she is not confirming a pause. We could see a pause in July and then continuation of cuts in Q4 or in September at earliest. There was a virtually unanimous decision on rate cuts, only one dissented and it was the most hawkish member Holzmann. He wanted to keep rates unchanged.
GBP
May final manufacturing PMI improved significantly printing 46.4 vs 45.1 as preliminary reported and up from 45.4 in April. Output and new orders rose for the second month in a row while input and output prices both declined. The latter will satisfy BoE. Services were revised up to 50.9 as there were increases in business activity and business optimism while new orders and employment continued to falter. Positive revisions helped push composite back into expansion with a 50.3 print vs 49.4 as preliminary reported and 48.5 in April.
BoE MPC Catherine Mann, the most hawkish member, stated that cutting interest rates at the same time as shrinking the balance sheet creates tension. She added that she will consider the balance sheet reduction when deciding interest rates in the future. All of this can be interpreted as Mann leaning more dovish in the future voting.
This week we will have employment data.
Important news for GBP:
Tuesday:
- Payrolls Change
- Unemployment Rate
AUD
RBA meeting minutes showed that board has debated whether to keep rates unchanged, cut them by 25bp or cut them by 50bp. In the end they opted for a 25bp as the case for it was the strongest and it would make policy predictable and cautious. Members have warned that inflation is still not in the middle of their targeted 1-3% range. The policy remains restrictive as board members judged it is still premature to move it into expansion. Australia has decided to increase minimum wages by 3.5% starting July 1 thus covering the current inflation level of 2.4%.
Q1 GDP saw economy grow by 0.2% q/q and 1.3% y/y vs 0.4% q/q and 1.5% y/y as expected. Growth in Q4 was 0.6% q/q and also 1.3% y/y. A decline was seen in consumption growth which printed 0.2% compared to 0.5% in the previous quarter with household consumption growing 0.4%. There was no growth in government consumption which comes after nine consecutive quarters of growth. Household savings rate jumped to 5.2% from 3.9% in Q4. The report gives RBA permission to deliver another 25bp rate cut.
Official PMI data from China for the month of May saw improvement in manufacturing as it printed 49.5 vs 49 in April. Production returned to expansion while new orders printed 49.8, very close to expansion with a nice rebound compared to the previous month. Employment component also improved. On the non-manufacturing side, there was a tick down as the print showed 50.3 vs 50.4 in April. New orders improved but remained deep in contraction while business expectations remain very healthy. Composite PMI was lifted to 50.4 from 50.2 the previous month.
Caixin manufacturing surprised to the downside and printed 48.3 after 50.4 in April. This is the lowest reading since September of 2022 and first time the reading fell in contraction since September of 2024. The report showed production and new orders declining with new export orders and employment dropping at a faster pace. Both input and output prices continued to decline and China is already struggling with deflation. One bright thing is that business confidence slightly improved. Caixin services improved to 51.1 from 50.7, with decrease in foreign demand, but increases in overall demand and business confidence. However, it was not enough to keep composite in expansion as it printed 49.9 making it the first time it printed below 50 since December of 2022.
This week we will have May inflation and trade balance data from China. The latter will show us how well China is adapting to tariffs.
Important news for AUD:
Monday:
- CPI (China)
- Trade Balance (China)
NZD
First dairy action in June saw GDT index print -1.6% as butter milk prices dropped by -6.1% with cheddar and whole milk powder prices also declining. Mozzarella prices showed the biggest increase.
CAD
BoC has kept rates unchanged at 2.75% as expected by the majority of investors. The accompanying statement shows high uncertainty caused by tariffs and global trade developments. Q1 GDP came in slightly stronger than bank expected but the labour markets has weakened and overall economy is expected to be “considerably weaker” in Q2. On forward guidance ”Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve.“
BoC Governor Macklem clarified that there was a clear consensus for no change. He clarified that there was no such clarity in regards to future. “On balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued US tariffs and uncertainty, and cost pressures on inflation are contained.“ He added that bank will closely monitor measures of underlying inflation and next two CPI reports will be watched with special attention.
Employment report for May saw economy add 8.8k jobs vs -12.5k as expected. The unemployment rate ticked up to 7% reaching the highest level since August of 2021 while participation rate remained at 65.3%. Wage growth was unchanged at 3.5% y/y. Composition of jobs was encouraging as economy added 57.7k full-time jobs while it lost 48.8k part-time jobs. BoC is expected to cut rates as early as the next meeting and this report could nudge them in that direction.
JPY
Q1 CAPEX spending showed a great improvement as it grew by 6.4% y/y compared to declining by 0.2% y/y in the previous quarter. This data will go into final GDP print next week and may even help economy grow in the first quarter. Final manufacturing PMI for the month of May improved to 49.4 from 49 as preliminary reported and up from 48.7 in April. The report shows continued declines in output and new orders but the pace has slowed down. Business optimism has increased as firms see global recovery which will further add to stabilization in manufacturing sector. Final services saw improvement to 51 from 50.8 as preliminary reported but still down from 52.4 in April. The report showed slower growth in output, new orders and employment while input costs continued to increase. Revisions managed to pull composite out of contraction as preliminary reported as final reading showed 50.2 print.
BoJ Governor Ueda spoke in the Parliament and stated that economy is recovering modestly. Comment that garnered most attention was that bank will continue to raise interest rates if both economy and prices move in line with forecasts, meaning he will act only if both turn up higher. He added that currently there is no need to change baseline view of the economy that was made on May 1. Average wages rose by 2.3% y/y in April but when inflation is accounted real wages came in at -1.8% y/y. This is the fourth consecutive month of falling real wages.
This week we will have final Q1 GDP print expected to show positive revision on the back of strong CAPEX.
Important news for JPY:
Monday:
- GDP
CHF
Swiss economy grew by 0.5% q/q and 2% y/y improving from 0.3% q/q and 1.6% y/y growth as seen in the previous quarter. Exports were the biggest contributor due to the front-running of tariffs. May inflation figures saw headline number fall into negative territory with a -0.1% y/y print. This is the first negative print since March of 2021. Strong Swissy, due to global trade uncertainties, is pushing inflation down and has managed to create deflation in the economy. Core number ticked down to 0.5% y/y from 0.6% y/y the previous month. SNB board member Tschudin brushed off the the report stating that it is only one data point and emphasized that they are focused on the medium term. SNB total sight deposits for the week ending May 30 came in at CHF444.9bn vs CHF443.4bn the previous week.