In US macro data, this week’s holiday-shortened economic calendar features several important data points (ISM manufacturing, ISM Services, JOLTS) that will provide the latest information on factory sector activity and the labor market. The main focus for market participants will undoubtedly be the June employment report, released on Thursday due to the July 4 holiday. We expect a headline NFP print of 85k for June and a UR (Unemployment Ratio) of 4.3%. Fed Chair Powell seems to be betting that inflation will rise while employment will remain stable which we find difficult to believe. If US consumers are weak as seen in May income & spending nos, corporates will find it difficult to pass on price increases. In fact, to save on reduced earnings, they might cut employment further leading to a full-blown employment blowoff by Aug NFP. In Fed speak, Fed Chair Powell will be speaking on Tuesday. There is no dated auction supply this week in USTs. In US fiscal events, senate Republicans are still debating the One Big Beautiful Bill Act (OBBB Act), but disagreement remains within the party. It’s uncertain whether the OBBB Act will pass both chambers of Congress by their self-imposed deadline of 4 July, though passage at some point this summer seems increasingly likely. In Rest of the World data, we have June flash inflation nos in Eurozone, Germany & Italy. We expect Euro area HICP inflation to tick up by 20bp to 2.1% y-o-y in June, and we think it will likely hover around its target level until year-end. Euro area core HICP inflation, meanwhile, likely printed unchanged at 2.3%. We expect the Euro area economy to recover only gradually in the near term, due to soft consumption and structural weaknesses. The ECB will likely cut rates below neutral, and we forecast a terminal depo rate of 1.50%, with 25bp cuts in September and December.
