Today's highlight is the ECB meeting outcome. The possibility of a 25 basis points rate cut has been frequently mentioned by ECB members, making it almost a certainty. The focus will be on the future outlook.
First, we need to examine any changes in the staff's economic outlook. In the previous March forecast, inflation was projected to be 2.3% in 2024, 2.0% in 2025, and 1.9% in 2026, with the target inflation rate expected to be reached by 2025. Recent data indicates a slight increase in wage agreements in Q1, suggesting that wage growth will be crucial for future inflation trends. Additionally, how ECB officials view service sector inflation will be of interest. President Lagarde's press conference could significantly influence the euro.
However, attention is also on the upcoming U.S. employment report tomorrow. Today, the U.S. will release trade balance data for April, Q1 labor productivity, Q1 unit labor costs, and initial jobless claims for the week ending June 1. The deviation of unit labor costs from the forecast, which is expected to be revised from +4.7% to +4.9%, will be particularly scrutinized as it reflects wage cost trends.
Other economic indicators include the UK DMP survey's 1-year inflation forecast for May, UK construction PMI for May, South Africa's Q1 current account balance, Eurozone retail sales for April, Canada's international merchandise trade for April, and the Ivey PMI for May.
Apart from Lagarde's press conference, there are no notable events scheduled for today.
Current Position Status:
- No open positions.
Yesterday's USD/JPY buy position hit the stop loss, leaving no open positions currently.
Yesterday, the Bank of Canada initiated a rate cut, and today the ECB is expected to follow suit. The rate cut has already been priced in, so the immediate impact might be limited. However, if President Lagarde provides clear guidance for the outlook beyond July, it could trigger a significant trend. Conversely, if the commentary focuses on a "data-dependent" approach, the market may remain range-bound.
With rate cuts from Switzerland, Canada, and potentially the Eurozone, and further rate cuts from other countries, we could see major trends that allow for substantial profit margins.
