Week Ahead – Wall Street believes inflation will be transitory

Treasury yields are stuck in no man’s land as Wall Street now agrees with the Fed that inflation will be transitory.  The underlying components of inflation look temporary and that has financial markets looking complacent.  The economic recovery will warrant Fed tapering closer to the end of the year, but for now we wait and see how big the deficit gets and how quick the labor market recovery is and if wage pressures continue to grow.

The upcoming week is filled with a wide range of market moving events.  US and UK markets are closed on Monday, but that won’t stop the OECD from presenting its latest Economic Outlook.  Tuesday’s trifecta of events include the OPEC+ meeting on output, an RBA rate decision, and the US ISM manufacturing reading.  Wednesday is quiet with the release of Eurozone PPI and the Fed’s Beige Book.  Thursday is all about the final PMI readings across Europe and the US.

The main event appears to be the US May Unemployment Report on Friday.  The US is expected to see 650,000 jobs created with the unemployment rate to decline to a still-elevated 5.9%.  Fed Chair Powell will also speak on climate change at the Green Swan panel discussion.  Lastly, cryptocurrency traders will keep a close eye on the Bitcoin 2021 conference in Miami.

US Labor Market Recovery to Accelerate

OPEC+ output meeting could show strategy over Iranian output boost

Will Bitcoin 2021 Conference give cryptos a boost



With US markets closed on Monday, the rest of the week is jam-packed with critical updates over the manufacturing and service sectors, the final durable goods orders reading, and the latest nonfarm payroll report.  Fed watchers will pay close attention to Quarles and Brainard on Tuesday.  The next day the focus shifts to the Fed’s Harker, who will speak on the outlook, Evans, Bostic, and Kaplan will also take part in a panel, and the Fed will release its Beige Book.  On Thursday, Bostic, Harker, and Quarles all make appearances at separate events.  Lastly, on Friday Fed Chair Powell takes part in the BIS panel on Climate, while Treasury Secretary Yellen participates in the G-7 summit.

Wall Street will fixate on the May employment report, which is expected to show 663,000 jobs created, and possibly an upward revision to last month’s disappointing 266,000 print.  The consensus range for May hiring is between 335,000 and 925,000.  Any miss with the jobs number would accentuate the labor supply problem and draw more pressure for states to end extra pandemic unemployment benefits.  If wages surprise to the upside that could get the bond market going.

The ISM manufacturing report is also expected to show overall economic expansion remained steady.  Traders might focus on prices paid which surged last time.


On Monday, Germany releases consumer inflation for May. CPI is expected to rise to 2.3%.  ECB Governing Council member Ignazio Visco delivers the annual Bank of Italy address.

On Wednesday, ECB President Lagarde delivers remarks at the Green Swan Conference. Also, the ECB will publish a report on the international role of the euro.

On Thursday the EU’s top court, the European Court of Justice, will hand down a binding ruling over Hungary’s challenge of the EU Parliament’s decision to open its Article 7 procedure for allegedly undermining the rule of law. Technically, the ruling could lead to the suspension of Hungary’s EU voting rights.


The Riksbank’s Governor Ingves discusses payments, monetary policy and financial stability at the Swedish Economics Association annual meeting.


UK markets will be closed for the Spring Bank holiday on Monday. The UK releases Manufacturing PMI for May on Tuesday, which is expected to remain unchanged at 66.1.  This points to strong growth in manufacturing.

On Tuesday, BOE Governor Andrew Bailey speaks at Reuters Global Responsible Business 2021 conference.  The opening address will be delivered by Prince Charles.

UK Chancellor Sunak will host G-7 summit next week.

Emerging Markets

Czech Republic

The Czech economy is projected to contract in the first quarter. The second-reading GDP report is expected to confirm the advance readings, with a forecast of  -0.3% (QoQ) and -2.1% (YoY).


On Monday, Poland releases GDP and inflation data.  The consensus for May CPI (YoY) stands at 4.9%.


First-quarter GDP (YoY) is expected to rise to 6.3%.  Turkey continues to see high inflation levels.  The estimate for May CPI is 1.30% (MoM) and 17.30% (YoY).


China has a heavyweight data week with the release of official PMIs on Monday, Caixin PMIs on Tuesday and Wednesday, and then the Trade Balance on Friday. China’s data has shown some signs of slowing down of late and low prints from the PMIs could see China equities sold, especially as the Yuan has hit two-year highs versus the US Dollar.

On that note, USD/CNY has fallen through 6.4000 this week, its lowest level since June 2018. THe daily PBOC fixes should be closely monitored for signals that the central bank is comfortable with more appreciation, or not. A sudden series of higher USD/CNY fixes could provoke a  short squeeze, particularly in the offshore version, the USD/CNH.

China’s clampdown on big-tech continues with demands that China mega-caps move their financial operations into financial holding companies. That continues to weigh on the Hang Seng and CSI 300. IF stock falls next week, we will be looking for signs that China’s “national team” is once again supporting prices. If they are not, any sell-off could quickly accelerate.


The Indian Rupee continues to defy the skeptics by continuing its powerful rally versus the US Dollar, despite the hit to the economy from their Covid-19 catastrophe. Daily cases have fallen but still remain close to 250,000 per day. THe INR is receiving support from international investor inflows looking for a buy-the-dip recovery story, and a fall in US Dollar buying by oil importers.

Indian markets face a number of challenges in the week ahead. An inflationary bias to US data and the budget will weigh on emerging markets currencies and equities. But the data calendar is also heavy. We have GDP on Monday, which is expected to only rise 1.0% YoY for Q1, and the story will be worse for Q2. Balance of Trade and PMIs are released Tuesday for mY and will be adversely impacted by the pandemic.

The latest RBI rate decision comes on Friday. The RBI will leave rates on hold as India finds itself in a stagflation corner of rising inflation and falling growth. Watch out for more surprise targeted QE, which last time spurred a big rally in equities but saw the INR plummet.

Australia & New Zealand

The RBNZ signalled this week that they would start hiking in H2 of 2022 sparking a rally in the NZD versus AUD and USD. The RBA announces its nest rate decision on Wednesday and is expected to be far more dovish if they remain consistent. That could trigger a sharp fall in AUD/NZD. AUD/USD looks vulnerable if 0.7600 fails, targeting another 400+ points of losses.

Australia releases GDP and RBA Minutes on Wednesday, with the minutes arguably more important as markets search for signs of wavering from the RBA’s dovish view. That could spark a sharp sell-off in Australian equities.

Australia releases Balance of Trade and Retail Sales later in the week but Australian equities and the AUD will be at the mercy of risk sentiment internationally. Expect volatility to increase as we draw close to Friday’s US Non-Farm Payrolls.


Japan releases Retail Spending, Consumer Confidence, Manufacturing PMI and Household Spending next week. With COvid-19 cases escalating and states of emergency being widened and extended, the risk is the data disappoints. Japan markets have ignored the domestic situation thus far although the Yen finally fell at the end of this week. The BoJ intends to extend pandemic support measures which are supportive of local equities.

Also supporting equities is the fall of the Yen which has tumbled to 110.00 versus the Dollar. Inflationary fears won’t go away in the US and concerns that the interest rate differential will widen has sparked Yen selling. A high US Non-Farm Payroll print Friday could spark a USD/JPY rally above 112.00 quite quickly.

More noise continues around potentially cancelling the Tokyo Olympics. If that becomes official, both the Yen and Nikkei 225 will see a sharp, but likely short, bout of selling.



Energy markets will fixate on both the OPEC+ ministerial meeting and revival of the Iran nuclear deal.  OPEC+ will likely move forward with the June increase of 700k bpd but may decide to hold off a July supply increase.  The crude demand recovery warrants an increase in July, but the alliance might choose to have a more cautious approach.  Uncertainty over Iranian output is complicating the upcoming OPEC+ meeting.  Expectations are high that the nuclear deal will get wrapped up before the Iranian presidential elections on June 18th.  Both sides are motivated, but will also like to look like they got the better end of the deal.

Depending on how much Iranian crude returns and how quickly, crude demand recovery could be in jeopardy.  Brent could swing by $10 in either direction, but energy traders are still optimistic the market will stay balanced. .


Bullion’s rally appears to be taking a break but that might be only temporarily until after Americans take their first mask-less vacation.  Gold’s fundamentals are still improving as central bank buying continues to improve, unprecedented monetary and fiscal stimulus efforts are still elevated, and as traders lose confidence with cryptocurrencies.

The true test for gold will be after the next couple of months of hot inflation reports.  If gold can hold its own against rising Treasury yields, the path to record highs could be in the cards for later this year.  For now Treasury yields have been depressed, but the outlook by the end of the year is still for much higher yields.


The buzz for Bitcoin 2021 is making this a must-see event for cryptocurrency traders.  The two-day event has shifted from LA to Miami and investors are excited that a major announcement might be in the cards. Speakers at the conference include Miami Mayor Francis X. Suarez, Twitter’s Jack Dorsey, and a fireside chat with MicroStrategy’s Michael Saylor.  Miami has been vying to become a major tech hub and could announce further commitments to cryptocurrencies.


Key Economic Events

Monday, May 31

– US markets will close for Memorial Day and UK markets will close for the Spring Bank holiday.

-ECB Governing Council member Visco gives annual Bank of Italy address.

-Riksbank’s Governor Ingves at the Swedish Economics Association annual meeting.

-The OECD releases its economic outlook

Economic Data and Events:

  • China May Manufacturing PMI: 51.1e v 51.1 prior
  • Denmark Unemployment
  • Japan April Industrial production M/M: 4.0%e v 1.7% prior, retail sales, department store sales, consumer confidence, housing starts
  • Germany CPI
  • India GDP
  • Poland GDP
  • Denmark GDP
  • Turkey Q1 GDP Y/Y: 6.3%e v 5.9% prior
  • Thailand BoP
  • Euro Zone Money supply
  • New Zealand ANZ business confidence
  • Australia inflation gauge, private sector credit
  • Thailand Trade Balance

Tuesday, June 1

– BOE Governor Bailey speaks at Reuters Global Responsible Business 2021 conference.

– Fed Governor Lael Brainard speaks

Economic Data and Events:

  • OPEC + meeting on output
  • Australia rate decision, BoP, building approvals, commodity index
  • US May ISM Manufacturing: 61.0e v 60.7 prior, Manufacturing PMI, Construction Spending
  • Canada March GDP M/M: 1.1%e v 0.4% prior; Y/Y: 6.5%e v -2.2% prior
  • Czech Republic GDP
  • Hungary GDP
  • Switzerland GDP
  • Australia GDP
  • Eurozone Manufacturing PMI, CPI, Unemployment
  • Poland CPI
  • Germany Manufacturing PMI, Unemployment
  • Switzerland Retail sales
  • Japan capital spending, Bank PMI manufacturing, vehicle sales
  • China Caixin PMI manufacturing
  • India Manufacturing PMI
  • UK Manufacturing PMI, Nationwide house prices
  • Australia Manufacturing PMI
  • Thailand Manufacturing PMI
  • South Africa Manufacturing PMI
  • Sweden Manufacturing PMI
  • Switzerland Manufacturing PMI
  • Mexico Manufacturing PMI
  • New Zealand building permits
  • Macau casino revenue
  • Mexico international reserves, remittances total

Wednesday, June 2

-Philadelphia Fed President Harker speak in a forum on racism and the economy

-Chicago Fed President Evans, Atlanta Fed President Bostic and Dallas Fed President Kaplan also speak in the above forum on racism.

– President Putin gives keynote address at St. Petersburg International Economic Forum

-Bank for International Settlements, Bank of France, IMF and the Network for Greening the Financial System will co-sponsor the virtual Green Swan Conference.  Speakers include Fed Chair Powell, ECB President Lagarde, BIS Chair Weidmann and People’s Bank of China Governor Yi Gang.

-ECB publishes report on the international role of the euro.

Economic Data and Events:

  • US Wards total vehicle sales, Fed Beige Book
  • Australia GDP
  • Canada building permits
  • New Zealand terms of trade index
  • Japan monetary base
  • Eurozone PPI
  • Singapore PMI, electronics sector index
  • Mexico central bank quarterly inflation report
  • UK mortgage approvals, money supply

Thursday, June 3

-Fed Vice Chair for Supervision Quarles speaks at a virtual SIFMA event.

– Philadelphia Fed President Harker speaks

Economic Data and Events:

  • US initial jobless claims, May ADP employment change: 700Ke v 742K prior, Services PMI
  • Singapore Markit PMI
  • Eurozone Services/composite PMI
  • Germany Services PMI
  • Sweden Services PMI
  • UK Services PMI
  • India Services PMI
  • China Services PMI
  • Russia Services PMI
  • Australia trade, retail sales
  • Japan Bank PMI services
  • New Zealand ANZ commodity prices
  • Turkey CPI
  • South Africa Standard Bank PMI
  • EIA Crude Oil Inventory Report

Friday, June 4

-Fed’s Powell takes part in a Green Swan panel discussion on central banks and climate change with ECB’s Lagarde, Bank of France Governor Francois Villeroy de Galhau and PBOC’s Yi Gang.

-G-7 finance ministers and central bank chiefs meet in London. Speakers include US Treasury Secretary Yellen and UK Chancellor Sunak

-Bitcoin 2021 Conference: Michael Saylor and Jack Dorsey to speak

-New Zealand hosts an online Asia-Pacific Economic Cooperation meeting of trade ministers from the group’s 21 economies

Economic Data and Events:

  • US May Change in Nonfarm Payrolls: 663Ke v 266K prior; unemployment rate, factory orders, durable goods,
  • Baker Hughes rig count
  • Canada unemployment
  • Russia retail sales
  • Eurozone retail sales
  • Thailand CPI
  • India rate decision
  • Japan household spending
  • UK new car registrations, Markit/CIPS construction PMI

Sovereign Rating Updates:

– Italy (Fitch)

– Sweden (Fitch)

– Denmark (DBRS)

– Germany (DBRS)

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.