The week ahead is a heavy US macro data week with May NFP, ISM manufacturing & ISM services & JOLTS for April. While we expect the employment part to show cracks, ISM PMIs are expected to come stronger. Our NFP expectation for May is 100k against current consensus of 125k. In Fed speak we have a heavy week with Fed Chair Powell speaking on Monday itself. We watch out for the tone of other Fed speakers who get a chance to put their views before the black out starts due to the 18th June FOMC meet.In US policy action, the tariff uncertainty continues. Trump 2.0 has entered the next phase. After the early and rapid salvo of executive orders, the legislative and judicial branches are becoming part of the process. As long as these procedures are adhered to, it is clear that they add complexity to the process, may complicate decisions, often require compromise, and they simply will take time. For investors, it further prolongs the uncertainty regarding the Trump administration's disruptive policy plans. We are also worried on section 899 of the big & beautiful bill. The provision would allow the government to tax US income of most US non-residents (including governments and central banks, regardless of tax treaties) from 'discriminatory foreign countries', such as those that impose digital services taxes. The rate would start at 5% and increase 5pp per year, up to 20%. This would reduce the effective return on US assets, including Treasuries, potentially reduce demand for them and lead to capital outflows, pushing up yields. In summary, while employment situation might look weak, Fed might not be swayed by it. Fed might continue to focus on inflation as long as tariff uncertainty is there. In RoW data, we expect Bank of Canada to remain on a dovish hold in it's 4th June meeting. In the ECB policy meet on 5th June, we expect the ECB to lower the depo rate by 25bp to 2.00%. We believe the hit to Euro area GDP growth from US tariffs and the rising likelihood the ECB undershoots its inflation target over the medium-term mean a June rate cut is largely a done deal. In China PMI data, both manufacturing & service PMIs are expected to come stronger due to resumption of US China trade.
