Week Ahead: Hoped for Hormuz Harmony Amid NFP

There are high hopes this week sees some concrete agreement between the US and Iran about a longer-term ceasefire and crucially, the opening of the Strait of Hormuz. Crude oil prices have front run this and fallen more than 20% over recent weeks, and that has brought down government bond yields and some of the excessive pricing of rate hikes in the months ahead, as inflation risks modestly ease. There’s only now around a coin flip chance of one Fed rate hike by year-end, down from above 60% one week ago. This certainly has room to fall further – let’s not forget, there was a 20% chance of a rate cut before the conflict – especially with the supposed new Fed Chair being a dove. We’d likely initially need to see a sharp pick-up in Hormuz traffic, which would cause the dollar to break out of its recent range. 

Aside from geopolitics, we get top tier hard macro data releases in the days ahead, with eurozone inflation and the usual monthly US employment report on the first Friday of the month.  Non-farm payrolls will be scoured for any inflationary impulses with an inline print keeping the three-month average consistent with balance between labour demand and supply. Interestingly, most economists now estimate that the current breakeven pace of job creation is no higher than 10k per month, meaning even a modest reading should be sufficient to keep the unemployment rate from rising further. 

Obviously, eurozone inflation will be a key input for the ECB meeting in a couple of weeks’ time. Metrics from France, Germany, Italy and Spain point to a headline figure broadly in-line or slightly cooler than the prior. Crucially, the transmission of price pressures from energy to broader areas of the economy – ‘second-round’ effects – remains relatively contained. That said, another 3.0% headline annual print, or even a slight moderation, will not divert the narrative from an ECB hike soon. The bank is still likely to go through with an ‘insurance’ rate hike, even as it battles stagflation and then the rising risk of a policy mistake.

In Brief: Major Data Releases of the Week

Monday, 1 June 2026

US ISM Manufacturing: Consensus expects a reading of 53.1, just above the 52.7 print in April. Focus will be on prices paid after they touched a near 4-year high last time. Manufacturing is currently relatively buoyant due to recent order strength and tariff-related reshoring. 

Wednesday, 3 June 2026

Eurozone CPI: Consensus sees the headline ticking up two-tenths to 3.2% and the core to 2.4%. The spotlight is on whether higher energy prices and the Middle East conflict might impact or are already impacting price data and second round effects. ‘Supercore’, which is components most sensitive to economic activity, and trimmed mean, which strips out the biggest component moves up or down, remain at historically modest levels.  

Thursday, 4 June 2026

US ISM Services: May non-manufacturing ISM is forecast to come in marginally higher at 53.7. Recent business confidence and the labour market picture have been weakening with higher inflation, rates and increased political uncertainty dampening the outlook for activity.   

Friday, 5 June 2026

US Non-Farm Payrolls: The headline is expected to print at around 95k jobs in May, above the prior 115k. The unemployment rate is predicted to remain at 4.3% and wage growth is seen one-tenth lower at 0.3%.  We’ve had recent solid weekly ADP and muted initial jobless claims data.

Canada Jobs: The headline is forecast to see 10k jobs added in May, more than the prior 17.7k contraction The jobless rate is seen steady at 6.9%. The BoC is data dependent at present, with uncertainty still high on Middle East and tariff tensions. 

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