Week of July 1

The week was relatively quiet and focused on the upcoming US PCE figures and geopolitics, which left markets somewhat subdued.

The following week includes many data releases, such as global PMIs, the Eurozone CPI, the release of the FOMC meeting minutes and the Nonfarm payroll figures.

Week in Review

In a week with few events, markets traded on secondary data ahead of the quarter's end. The final US first-quarter GDP was revised slightly higher to 1.4% from the prior 1.3% estimate. Durable goods orders came in as expected, with a slightly slower growth pace. Comments from Federal Reserve officials were generally seen as hawkish, with Michelle Bowman stating she did not foresee an interest rate cut this year.

The final UK first-quarter GDP was also revised higher to 0.7% growth for the quarter compared to the prior 0.6% second estimate.

Japan increased warnings on FX as the yen weakened over the week following the BOJ's policy meeting summary release and softer than expected services PPI. However, there were no signs of actual intervention.

Canadian inflation accelerated to 2.9% versus an expected drop to 2.6%, with the BOC's preferred trimmed mean consumer price index ticking up slightly. French inflation eased instead of the anticipated acceleration, while the Spanish CPI came in hotter than forecast.

Geopolitically, tensions between Israel and Lebanon escalated with the US preparing to evacuate personnel in the event of war. On Wednesday, there was a reported attempted military coup in Bolivia. Debates among leading candidates in France and the US captured headlines, with establishment candidates performing poorly. US Presidential Candidate Donald Trump stated he had made his vice presidential selection but did not disclose who it was.

Top Events in the Week Ahead

The week will include time off in the US for half of Wednesday and all of Thursday. However, major data releases are still planned from the US despite the mid-week break.

Jobs and Policy into the Spotlight

The most anticipated data is the Nonfarm payrolls report on Friday, which is expected to show employment growth slowing to 160,000, with unemployment holding steady at 4.0%. A miss could see gold decline towards its 21-week SMA near $2250 per ounce.

Canada will also report monthly job numbers, with unemployment predicted to remain unchanged at 6.2% while job growth continues easing. Loonie continues finding support at 1.36 but is still unable to reclaim 1.37.

On Wednesday, the FOMC will publish minutes from its last meeting, which investors will review for insight into the decision to forecast one rate cut remaining this year versus three cuts previously estimated.

Central bank activity includes minutes from the recent RBA meeting, which reviewed the discussion on potentially raising interest rates. Positive developments could push the Aussie above 67 cents.

Upcoming Elections

The first round of the French parliamentary elections is expected to take place this weekend. Surveys show that the far-right National Rally party gathered the most votes but was short of an outright majority. Candidates then have one week until the July 7 run-off vote. The French index could come under pressure due to increased uncertainty if the political landscape in France is about to change.

On Thursday, the United Kingdom holds a general election that polls indicate will result in a substantial victory for the opposition Labor Party and its leader Kier Starmer becoming the new Prime Minister. This has already been priced in in the pound, but further upside may be possible given the certainty a Labor government brings. 1.2650 is a major support until the event reveals the UK's (next) Prime Minister.

Euro Area Recovery Losing Momentum

Manufacturing data from France and Germany, the largest Eurozone economies, are expected to further weaken early next week. However, moderating inflation in Germany may preview slower price increases across the euro bloc as investors evaluate the ECB's willingness to continue easing measures. Core CPI is projected to decrease to 2.5% from 2.9% previously. Weaker data could see the euro slide towards 1.06.

International Trade in Focus

Several countries will publish May trade balance figures in the coming days, including the growing US trade deficit. Canada's trade surplus is also seen narrowing due to slowing exports. Yet Australia's trade surplus may widen because imports are forecast to fall faster than exports, continuing the trend of weakening global trade and potentially signaling a slowing economy.

This data comes as official and private Chinese manufacturing PMIs are anticipated to diverge, with the official measure remaining contracting but the private gauge remaining expansionary.

Other Events and Earnings

The UK Nationwide Housing price index for March will be published on Monday. Tuesday marks the start of the annual ECB Forum on Central Banking in Sintra, Portugal. Japan's Tankan large manufacturers survey for the second quarter is due on Wednesday. German factory orders for February are scheduled for release on Thursday. Eurozone retail sales figures and German industrial production data for February will be released on Friday.

Few company earnings are expected due to the holiday period and the new quarter. However, Woodside Energy, Constellation Brands and Shell's oil and gas production update are slated for the coming week.