Week of June 30

The week featured a light economic calendar, with the US PCE and durable goods reports, as well as Fed Chair Jerome Powell's congressional testimony, taking centre stage.

The week ahead features global PMIs, Euro Area inflation figures, and an early release of US NFP as traders watch the clock tick down to the end of the 90-day moratorium on the trade war.

Week in Review

A relatively quiet economic calendar allowed geopolitics to have a significant influence on markets this week, with a ceasefire between Iran and Israel shifting the focus to trade deals.

In terms of data, the US took centre stage with the release of durable goods orders, which came in well above expectations at 16.4% from -6.6% in April, mainly driven by aircraft orders. The final reading of US Q1 GDP growth was revised lower to -0.5% from the preliminary figure of -0.2%.

During his 2-day testimony before Congress, Fed Chair Jerome Powell reiterated the stance of uncertainty from the latest FOMC meeting, stating that tariffs were expected to increase inflation. However, he also said that if consumer prices remained constrained, the Fed might ease policy sooner.

In Europe, flash PMIs came in stronger than expected, with German and UK manufacturing still in contraction but recovering faster than estimates. BOE Governor Andrew Bailey reiterated that rates remain in restrictive territory and that the path forward is downward, but not at a preset pace. He also said he expected the labour market to show weakness.

Meanwhile, Canadian inflation remained unchanged at 2.5%, but the BOC's preferred measure, the trimmed-mean rate, ticked down to 3.0% from 3.1%.

Back on geopolitics, markets whipsawed after the US launched airstrikes against Iran's nuclear sites over the weekend, followed late on Monday with US President Donald Trump announcing a ceasefire between the countries that coalesced by the middle of the week. With tensions in the Middle East easing, markets turned their attention to the ongoing trade war, as rumours circulated that deals with some major countries were imminent. The White House announced that it had reached a trade deal with China late on Thursday, and the EU disclosed a series of retaliatory measures that it could use if an agreement was not reached in time after receiving a proposal from the US. Following a meeting of NATO leaders, the organisation confirmed a deal to increase spending to 5% of GDP and omitted earlier wording that Ukraine's future was in NATO.

Biggest Market Movers

• The Nasdaq hit consecutive record highs in the wake of the US-brokered Iran-Israel ceasefire, up over 5% by the time of writing Friday.
• The dollar ended up at a 3-year low as talk circulated of an early nomination of a new Fed Chair in a bid to pressure for lower rates, down around 2%.
• Crude prices dropped dramatically as the ceasefire between Israel and Iran took hold, recording a ~15% drop.
• Gold prices trended lower through the week as fading safe-haven demand overcame dollar weakness.

Top Events in the Week Ahead

The coming week is slightly lopsided, with the US closed for a holiday on Friday amidst the usual start-of-the-month data rush. As a result, the US NFP will be released on Thursday.

US Jobs Data More Important

The market is expecting further easing in the labour market on Thursday, with 100,000 jobs added compared to 139,000 a month before, and the unemployment rate is forecast to stay unchanged at 4.2%. Fed officials have expressed confidence in the jobs market, which supports keeping rates unchanged through the summer, though recent layoffs remain a concern.  Sitting by the 50-day moving average at 144.50, USDJPY can move either towards 143.00 or 148.00.

Diminished Trade War Effects

Global June PMIs come out at the start of the week, with Chinese manufacturing expected to return to expansion in the official measure but fall short in the private Caixin survey. Euro Area PMIs are expected to confirm an improvement despite the effects of tariffs, although they still remain below the expansion level. Meanwhile, the US ISM manufacturing PMI is also expected to move towards expansion. The Aussie could continue its ascent after reaching a 7-month high at 0.6563 if Chinese data beats estimates, paving the way to at least 0.6600. On the other hand, if the data disappoints or the dollar shows strength, the AUDUSD pair could slide towards its 50-day moving average at 0.6450.

Euro Area Inflation Supports ECB Pause

On Monday, German inflation is expected to rise to 2.2% from 2.1%, moving away from the ECB's 2.0% target, as the largest economy in Europe experiences a slight improvement. CPI change for the whole of the Eurozone is expected to tick up to 2.0%, with the core rate accelerating to 2.4% from 2.3%. The readings could set the direction of EURUSD early in the week, with a break past 1.1800 eyeing the 1.1900 handle next, and major support under 1.1635 and 1.1600 seen at 1.1510.

Other Events, Earnings

The ECB's Sintra forum begins on Monday and will last several days. Tuesday features the release of the Japan Tankan Large Manufacturers Index, along with consumer confidence data. Eurozone unemployment figures come out on Wednesday. Thursday includes the trade balances of Australia and Canada. Friday has German factory orders.

A quiet earnings calendar awaits for the week with few notable names reporting, such as Constellation Brands, Haleon, Sainsbury's and Currys.