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Week Ahead – Markets Entering Choppy Waters

Wall Street seems to be finally agreeing with the Fed that inflation will be transitory. Despite all the robustness with US manufacturing and service sectors, financial markets will remain in wait-and-see mode over how high pricing pressures get and if the job market recovery continues to disappoint on labor supply issues. Wages are going up, bottlenecks over a range of products will remain the theme for months, and elevated commodity prices will keep the debate lively over when the Fed should taper.

The upcoming week is filled with another round of Fed speak and a plethora of economic releases, with many traders focusing on consumer data points. On Tuesday, the Conference Board’s Consumer Confidence reading is expected to soften from 121.7 to 119.3. The Friday release of personal income and spending will show dramatic drops as the stimulus impact wanes.

Traders will pay close attention to EU leaders summit meeting on Monday, which will include strategy over reaching the EU’s 2030 target of reducing greenhouse emissions, Brexit, and Russia. Tuesday, the IFO report should show a modest improvement in Germany. Wednesday’s RNBZ rate decision should see no change with monetary policy, but discussions over tapering bond purchases could begin.



As the US recovery accelerates concerns are growing that worker shortage problems could derail the swift labor market recovery that has been mostly priced in.  Delays in getting infrastructure spending done is also starting to weigh on the outlook.  President Biden will likely have to abandon bipartisan negotiations, but if he waits too long, the cyclical rotation trade could see a little more of an unwind.

Fed speak will come from Brainard, Mester, Bostic, George, and Quarles.  Investors will be fixated on each members’ timeline for considering a tapering of asset purchases.  The Jackson Hole Symposium is expected to happen in August and remains the favorite time for when the Fed could unveil a plan for tapering.

It is a busy week of economic releases, with financial markets focusing on Consumer Confidence, Durable goods, Personal Income and Spending, and the second GDP reading  and Fed’s preferred inflation measure, PCE Core Deflator.  If the core PCE price index rallies to 3% or higher and seems likely to remain elevated going into next year, many traders may think the Fed may have to consider an accelerated QE tapering with a rate hike before the end of next year.


On Monday, there are no economic releases out of the eurozone, with markets in France and Germany closed for a public holiday.

European Council leaders will hold a summit in Brussels on Monday and Tuesday. In this special session, the leaders will discuss how to achieve the EU’s 2030 target of cutting greenhouse emissions. Other topics include the Covid pandemic, the U.K., and Russia.

On Tuesday, the focus will be German data. The German economy is expected to contract in Q1, with a consensus of -1.7% (QoQ) and -3.0% (YoY).

On Wednesday, France releases manufacturing confidence and consumer confidence.

ECB Governing Council member Francois Villeroy de Galhau speaks at the French National Assembly finance committee. ECB Vice President Luis de Guindos speaks at a virtual conference on the topic of financial integration. EU agriculture ministers hold a two-day meeting in Brussels to discuss a reform of farm subsidies in the EU, agri-food techniques, and organic farming.

On Thursday, Germany releases GfK consumer confidence which should modestly improve from -8.8 to -5.2.

ECB Executive board member Isabel Schnabel speaks at the Forum New Economy about a new mandate for central banks. The Institute of International Finance live-streams its IIF European Summit, titled “The Role of Financial Services in a Sustainable, Innovative and Resilient Europe.”

On Friday, the eurozone releases economic confidence and consumer confidence data.

The Global Solutions Summit is being held in Berlin. Speakers include German Chancellor Angela Merkel, Italian Prime Minister Mario Draghi, UN Secretary-General Antonio Guterres and OECD Secretary-General Angel Gurria.


On Friday, Norway releases unemployment.


On Wednesday, Riksbank First Deputy Governor Cecilia Skingsley speaks on the Swedish economy and participates in a panel discussion. The central bank will also release its Financial Stability Report.

On Friday, Sweden releases retail sales and household lending.


The UK has been on a steady path to recovery, with the economy reopening. However, the next reopening phase set for June 21 could be endangered by a new Covid strain, with hotspots at London’s Heathrow airport and several other locations. This new strain has more than doubled in the UK in just one week.

On Tuesday, the UK releases public sector net borrowing(ex banking groups), which should increase slightly from GBP 28 billion to GBP 32 billion.

BOE policymaker Silvana Tenreyro presents a lecture at the Latin America Centre in Oxford, titled “Economic Challenges from the Pandemic”.

On Wednesday, BOE policymaker Gertjan Vlieghe gives a speech at the University of Bath, on the topic “What government bond yields can tell us about future growth and inflation.”

On Friday, U.K. Chancellor Rishi Sunak hosts a virtual meeting of G-7 finance ministers and central bank governors ahead of the in-person gathering in June.

Emerging Markets


The Hungary Central Bank will announce a rate decision on Tuesday. No change is expected to the current rate of 0.60%, with the bank waiting on any rate hikes.

Hungary’s inflation remains a key concern, as inflation was the fastest in Europe and the highest since 2012. At the same time, core inflation was much more stable, with a rise of only 3% in April, which was the lowest since 2019. Central bank policymakers are in a wait-and-see mode, with the bank forecasting that the rise in inflation will temporarily peak at around April’s levels before slowing to within the 2%-4% tolerance range in the summer.

Money-market traders raised bets for a rate hike in the next three months only slightly after the data was published, still broadly expecting an increase of about 15 basis points via the central bank’s most-influential one-week deposit rate. The forint has risen slightly to 355.80 per euro, far from the 370 level that analysts have circled as a potential trigger for the central bank to intervene and raise rates.


Poland President Andrzej Duda visits Turkey on Monday and Tuesday, as Poland is looking to purchase military drones.

On Wednesday, Poland releases unemployment data.


On Monday, Russia will release unemployment, retail sales and industrial production.

South Africa

On Wednesday and Thursday, South Africa President Cyril Ramaphosa appears before a panel probing graft during the rule of former South African President Jacob Zuma.

On Friday, South African releases its budget balance.


China releases Industrial Profits on Wednesday but it is unlikely to be market moving unless it diverges massively to the downside.

The week is a slow one data wise meaning that Mainland markets are likely to move in sync with US markets, unless some unexpected local headline risk is introduced. That is likely to be inthe