Market Commentary

The positivity from the interim peace deal in the Middle East continues to play through in markets, with a broad risk-on environment for the most part, and increasing expectations of a gradually lower inflation / lower interest rate environment than the previous consensus. Oil prices continued to slide, with a barrel of Brent down to $78, the lowest since early March. Natural gas prices are also declining, with the European TTF gas price down to around €42/MWh, down about a third from this year’s peak, though gas prices might be supported in the short term by the need to replenish gas storage in Europe ahead of the winter. The euro ticked back up to above $1.16 to the dollar but has not threatened the $1.1640 level it was at before May’s strong US payrolls. Against sterling, the euro is up at 86.5p but remains in that very tight range around 86.4p, while sterling made up a little ground on the dollar, up to around $1.3410

Yesterdays Events

The reduction in interest rate expectations continues to see bonds rally across the curve. 10-year German yields were down another 3bps and closer to 2.9%, the lowest they have been since the start of March, and down about 25–30bps from where they were in mid-May. US 10-year Treasury yields were down 4bps to 4.44% and UK 10-year gilt yields were down 2bps to 4.79%. With the Fed announcement this evening and the BoE tomorrow, there could be further downward pressure on yields if the commentary/materials from the conclusions of those meetings reflect positively on the situation in the Middle East and if members indicate they are less concerned about future inflation. In equity markets, there were further gains early on from the risk-on environment. The S&P edged back up close to a record intraday before a sell-off in the semiconductor sector turned the index around, and it lost 0.6% for the day, while the NASDAQ was off more than 1%.

ECB Chief Economist Philip Lane said yesterday that despite the Iran deal, there was inflation ‘in the pipeline’. He warned that indirect effects were still expected to feed through to prices and that the ECB saying the rate path was data-dependent was ‘not an empty phrase’. He stressed that a further hike remains possible if the data warrants it and that the hike at the meeting last week was a ‘straightforward decision’. His successor at the Central Bank of Ireland, Governor Makhlouf, backed him up, saying that ‘an end to the conflict does not necessarily mean an immediate end to the shock’ and it remains to be seen how quickly supply chains and prices react. Similarly, Bank of Spain Governor Escrivá warned that energy supply complications were likely to persist and it is not certain that markets are correctly pricing this disruption. He added that ECB policymakers do not consider the (inflation) danger to be over, and that further rate hikes could be warranted.

UK CPI inflation was steady in May coming in at 2.8% year-on-year unchanged from the April print. This is a surprise to the downside as an increase to 3.0% was the consensus forecast. Core CPI came in at 2.6% ticking up from 2.5% in April. Energy prices continue to put some upward pressure on inflation and the softer headline number this month is partly down to less of an increase in food prices. Services inflation, which the Bank of England watches closely, came in a bit higher than expected at 3.7% up from 3.2% in April and a touch above the consensus. The Bank of England MPC is widely expected to stay on hold at its meeting tomorrow and, on the face of it, this lower than expected headline number and the recent fall in wholesale energy prices reinforcing the view an immediate hike is not needed and reduces the argument for tightening policy later in the year. However, the strength, and stickiness, of services inflation as evidenced by today’s data complicates that longer term outlook somewhat as it indicates that underlying domestic inflationary pressure is still to the upside despite the more positive picture presented by the headline number.

The ZEW sentiment indicator in Germany was much more positive in June. It rose to 10.5 this month, a turnaround from the -10.2 reading in May and the first positive reading since March. The rise was all due to improving expectations as the current conditions index stayed negative and worsened to -81, from -77.8 last month. Part of the survey was conducted in recent days when the interim peace deal in the Middle East was announced, and it appears that more positive news around a potential peace deal was a driver for the improvement in expectations, with the ZEW president noting that financial market experts had been forecasting an end to the conflict and an easing in energy price pressures. The improvement was broad-based, with all sectors of the economy in the survey posting higher expectations readings than in May and most now back in positive territory.

The Day Ahead

On the agenda today, we get the final reading for Euro Area inflation for May and US retail sales, but the focus will be on the FOMC meeting decision this evening. No change in rates is virtually certain, but markets will closely watch as new Fed Chair Warsh is blooded in the press conference to see if he indicates a different tack for the committee under his leadership, as he has signaled previously that he thinks the Fed should have less forward guidance and communication. New forecasts, including updated dot plots from FOMC members, will also be released and, given events in the past few days, may show some significant changes from March’s forecasts.

Market Commentary

Monday was dominated by the news of the interim US/Iran peace deal, which kicks off 60 days of further negotiations on a more comprehensive and durable agreement, but the Straits of Hormuz could be open to traffic by the end of this week – though there is reports of some disagreements between the US and European allies about the practicalities of that timeline as the Straits will have to cleared of mines and patrolled. The news set off a broad global risk-on rally, with equities shifting higher, bond yields dipping and oil prices shooting down. The euro opened yesterday, sharply higher against the dollar at over $1.16, getting up to $1.1620 at times, but lost a little ground during the day and is down to around $1.1590 now. It was similar for sterling, which got up above $1.3450 at times yesterday but is off a little now, at close to $1.34. Very little is shifting the euro/sterling cross, which ticked up marginally yesterday to 86.5p but is once again at 86.4p this morning. The Iran news sent wholesale energy prices globally sharply lower. A barrel of Brent opened at under $85 and has weakened further to under $83 now, about 25% lower than its peak during the conflict, though still up about $20 per barrel on prevailing prices before the war started.

Yesterdays Events

Bonds rally further as markets reduce chances of interest rate hikes. With the outlook now changing, there were further falls in yields in Europe and the US. 10-year bund yields were down another 4bps yesterday to 2.95%, and down about 13bps since last Wednesday. 2-year bunds were down 5bps to 2.57%. 10-year UK yields were down 6bps to 4.17% and 10-year US yields shaved off 3bps to 4.05%. Markets are repricing rapidly the interest rate path for the major central banks as inflation pressures from higher oil prices now start to ease. The market had thought the ECB would hike in September, but that is now pushed out to October (and at times yesterday pricing was pushing that hike into December). The next Fed move, still a hike, is not seen until March of next year now, while the Bank of England hiking cycle is now not expected to start until November/December of this year. All those central banks are now priced for just one hike from this point, with the chances of a further hike for any of them in the first half of next year at best 50/50 currently. Overnight the Bank of Japan raised rates by 25bps taking the benchmark rate to 1% for the first time since 1995 and the BoJ signaled a steadying of policy with the market not fully pricing in another hike from them this year.

In equity markets, there was a further risk-on rally for most indices, particularly in the US, with the S&P up 1.7%, and back to about 0.5% off its record high. The NASDAQ was up 3% and the Dow up 0.9%. The gains were smaller in Europe, with the Eurostoxx up 0.7%, though that index has now taken back all its losses since the start of the US/Iran war and is back to a record high. The FTSE lost ground, down 0.4% for the day, but that was due to poor sentiment around its energy and defence companies, which weighed on the index.

All quiet from Bank of England and Fed speakers ahead of the meetings this week, but we did get more commentary from the ECB. Despite the good news from the Middle East and the likelihood of more subdued energy prices, the ECB will still be concerned about the damage that has been done already by the energy price shock. President Lagarde said yesterday that second-round inflation effects have ‘absolutely started’ to emerge and that the ECB would ‘necessarily have to take measures’ if they persist. Nagel said the ECB is still ‘broadly neutral’ despite last week’s hike and that while they are no longer dealing with a short-term supply shock, they ‘cannot exclude second-round effects’ and would keep all options open for the July meeting.

US industrial production fell 0.1% in May and the Empire manufacturing sentiment index fell to 5.7 in June from 19.6 in May. Production appears to have stalled in May, with a sharp drop in chemicals and petroleum products masking a solid durable goods increase, particularly goods related to the current boom in AI data centre outfitting. The weakness in chemicals and petroleum is probably linked to supply chain disruption from the war in the Middle East, so yesterday’s peace deal should, hopefully, get supply chains back to normal in the coming months. Similarly, the fall in the Empire index was due to concerns over cost pressures from higher energy costs from the conflict, which should now, hopefully, ease.

In China, key data released overnight was poor, consumer and investment numbers dipped with retail sales in May down 0.6% year-on-year and year-to-date investment down 4.1%. House prices also fell in May. While there are signs of slower growth on the domestic side of the economy, exports and tech industries are doing well, led by AI, with industrial production up 4.5% year-on-year in May. The data shows the broader Chinese economy is somewhat imbalanced and led by exports and factors outside of China’s control while domestic demand is weak. The data today showing the economy may be growing at close to 4% currently, below the Government’s official target of 4.5% to 5%.

The Day Ahead

On the agenda today, we get German ZEW confidence data, Euro Area labour costs, and the ADP weekly employment change and monthly housing starts from the US. ECB speakers include Chief Economist Lane, Escriva and Sleijpen.

Market Commentary

The evolving situation in the Middle East sees a peace deal between the US and Iran and the Straits of Hormuz reopen. President Trump, last night, said the deal was ‘complete’ and that it will be signed in Switzerland next week. No text has been released and, once it is signed, the waterway will reopen and also the US and Iran will have further talks on resolving outstanding issues including sanctions on Iran. Oil and gas prices fell further on the news, having declined already late last week when news that this deal was close broke. A barrel of Brent fell to $83, the lowest since the opening days of the Iran war, while WTI fell to $80. The dollar also slid, with the euro getting back to above $1.16, for the first time since the strong US payrolls data two weeks ago, and sterling rose to $1.3440. The euro and sterling remain locked in a tight trading range, having been trading around 86.3p since the start of the month and continuing to trade around that level today. There could be further positivity today from this peace deal, but there are still threats to the deal, not least from Israeli strikes in Lebanon over the weekend, which the US has asked them to stop. Further out it seems the most difficult areas to agree have been left to the next stages of talks which could mean more volatility during those negotiations.

Yesterdays Events

Euro bonds rallied further on Friday. The ECB rate hike on Thursday did not send bond yields higher and, in fact, the positive news from Iran has seen rates fall. Should this deal hold and energy prices and inflation ease, therefore reducing the pressure on central banks to raise rates. Euro area bonds rallied across the curve, with 2-year, 5-year and 10-year yields all falling in most euro area member states. 10-year bund yields are down 8bps since last Wednesday and are now below 3%. UK 10-year yields are down 10bps since Wednesday and US 10-year yields are also down 7bps. Yields are ticking down again on the open this morning. The positive sentiment also saw broad-based gains in equities, with the S&P up 0.5% on Friday and the Eurostoxx up over 2% on Friday, making up for missing the rally in US stocks on Thursday when news of the possibility of a peace deal broke after the European close. Overnight last night, after news of the Iran deal, the Japanese Nikkei index gained almost another 5% following a near 3% gain on Friday.

The University of Michigan US consumer sentiment index came in at 48.9 in June, above the consensus, and rebounding from a record low of 44.8 in May. While a welcome upward move, the first in four months, the index remains at a historically low level and the report noted that views on the economy remain ‘dour’ and consumers were focused on ‘kitchen table issues’ like the cost of living. The rebound appeared to be driven by easing in the pace of gasoline prices in June, so the news of the Iran deal, which should lower gas prices, should boost consumer confidence next month. While cost of living remains a key concern, 1-year ahead and 5–10 year-ahead inflation expectations both fell, which suggests inflation expectations remain anchored, a positive for policymakers at the Fed.

The Bundesbank published its latest set of forecasts for Europe’s largest economy. Not unexpectedly, the Bank cut the growth outlook for Germany while raising the inflation outlook when compared to its last forecasts in December. GDP growth in 2026 is now expected to be just 0.5% before rebounding to 0.8% next year, with growth expected to stagnate in Q2 of this year before growing only slightly in Q3 and onwards. The economic recovery, which began last year supported by fiscal stimulus, is expected to be weighed down by reductions in household spending power due to rising inflation.

There were several ECB speakers out on Friday following the ECB decision on Thursday to raise rates. Nagel from the Bundesbank said the ECB stood ready to hike again in July if necessary, but future decisions would be data-driven. Moulin from the Bank of France said that the energy shock will be persistent regardless of any short-term developments and the ECB, while not committed to any rate path, was determined to bring inflation back to 2%, while Makhlouf from the Central Bank of Ireland said he was seeing more broad-based inflation impacts and the ECB needs to get ahead of inflation. While this was all quite hawkish talk, the chances of a July hike have receded, again, due to the Iranian peace deal. The market was pricing a 60% chance on Thursday but only a 15% chance today, with a September hike now not fully priced in either and a fresh 25bps hike pushed out further into Q4.

The Day Ahead

On the agenda this week, aside from the seeming end to the US/Iran war the focus will be on central bank decisions and any guidance thereafter. The FOMC meeting and rate decision will be on Wednesday and new Chair Warsh’s maiden press conference will be closely watched, in light of the evolving situation in Iran, alongside updated materials including a new dot plot. There is no chance of a change in rates, with the market currently pricing in the next move, a 25bps hike, next March. Similarly, the Bank of England MPC will announce their decision on Thursday, but again, while the event will be closely watched, there is no chance of a change in policy, with the market not pricing in a UK hike until December.

Market Commentary

The ECB raised interest rates by 25bps, taking the deposit rate to 2.25%. The euro was steady in the aftermath of the meeting, as this move was widely expected and the press conference and staff projections show the bank remains hawkish but, broadly speaking, no more or less than was thought before the meeting. The single currency did lose a little ground to the dollar over the course of the day, moving down towards $1.15, but this downward pressure was likely on the back of what seemed like a worsening situation in the Middle East, as sterling also lost ground to the dollar. However, late on came news that President Trump had cancelled further strikes against Iran and that a peace deal could be signed as early as this weekend with the Strait of Hormuz opening thereafter. That saw the dollar weaken as money moved from it as a safe haven, with the euro rising, once again past $1.1570 and sterling gaining back to $1.34. Meanwhile, EURGBP remained, again, in and around 86.3p. Oil prices fell sharply on the news, as you would expect, with a barrel of Brent back below $90/barrel and at the lowest it has been since late April.

Yesterdays Events

Euro bonds rally despite ECB rate hike. With the ECB rate move already priced in and well telegraphed by markets and no surprises in President Lagarde’s press conference, euro area bonds rallied across the curve with 2-year, 5-year and 10-year bund yields all falling about 4bps and similar falls in most euro area member states’ bonds. US bonds also rallied, as the news of a peace deal in Iran being close sent 10-year treasury yields down almost 10bps back below 4.5% and markets pushed out the likelihood of Fed rate hike this year, with a hike now not fully priced in until early 2027. Equities were already seeing some respite yesterday before the peace deal news broke and that news sent equities even higher. The S&P rose 1.8% for the day, wiping out most of the losses taken over the past two days. Industrial stocks led the rebound and there was an uptick for some under pressure tech stocks such as those in semiconductors and hardware while in other tech areas (software) there was a continued fall. The Eurostoxx saw a smaller gain, up 0.8%, though the Iran news came after the close.

The ECB decision to hike rates by 25bps was unanimous. They are the first major central bank to raise rates since the start of the Iran war and this is the first ECB hike since September 2023. President Lagarde, in her press conference, was hawkish but not overly so with the market still fully pricing in the next rate hike for September and there was no signal from Lagarde that a rate hike in July was likely. President Lagarde said the hike this month was a ‘good decision’ but not a ‘forceful’ one, stressing the hike was not an ‘insurance’ move as some members had suggested but a necessary policy response to a ‘major energy shock’. She said the decision was ‘robust’ across any of the scenarios the ECB had previously detailed, including the milder one where inflation increases were more modest. She said ‘there will be no pre-set rate path’ but the outlook was uncertain with upside risks to inflation.

The ECB staff’s revised projections showed a modest reduction in the growth outlook with GDP predicted to increase by 0.8% this year (from 0.9%) and 1.2% next year (from 1.3%) while HICP inflation is revised more sharply higher, to 3% in 2026 (from 2.6%) and 2.3% in 2027 (from 2.0%). The ECB is seeing inflation broaden through the wider economy from energy but still says long-term inflation expectations support a return to 2% price growth. The economy is weaker with the Iran war weighing on activity with services surveys, in particular, pointing to a slowdown. However, Lagarde said growth is not under significant threat and the underlying euro area economy (removing Ireland due to its sharp drop in Q1) grew by about 1% year-on-year in Q1, positive but admittedly more modest growth.

The UK economy contracted by 0.1% in April according to the monthly GDP release. This is the first monthly contraction in eight months but the 3 month moving figure at 0.7% and year-on-year change at 1.2% remained healthy with the carryover from strong Q1 activity helping. Services was weak, falling 0.2% on the month with consumer confidence hit by worries over the Iran conflict while manufacturing was strong, up 0.4% month-on-month helping to offset some of the weakness in services. While the usefulness of the monthly data has been questioned by Governor Bailey of the Bank of England given its frequent revision today’s data may be a sign of the underlying softness in the UK economy as a number of forecasters feel the strong Q1 data was a product of some demand being brought forward and that activity would be weaker going forward.

The Day Ahead

On the agenda today, we have University of Michigan sentiment and BoE inflation expectations. Some central bank speakers are returning, just from the ECB, with Nagel and Rehn due out.

Market commentary

President Trump said Iran ‘would pay the price’ for slow peace talks, and there were further US strikes on Iran as Trump promised to ‘hit Iran hard again’. That drove oil higher again. A barrel of Brent crude had fallen to around $90/barrel when a peace deal looked near a few days ago, but it rose 2% yesterday back to $93, and the volatile situation could see further moves today. EURUSD also had a volatile day, with the single currency rising to above $1.1570 briefly before settling back to $1.1540. Similarly, sterling got back above $1.34, but is now back to $1.3380, and EURGBP is still very range-bound and trading around 86.3p.

Yesterdays Events

Modest moves in bond markets. US yields initially ticked down following US CPI data. The data was more or less in line with expectations, but yields moved down slightly. However, the news of renewed hostilities between Iran and the US saw that reverse, and yields were up slightly on the day. US 10-year yields were up 1bps to 4.55%. The deterioration of the situation hit European yields, with rises, particularly at the short end of the curve. 2-year Bund yields were up 5bps to 2.7% and 10-year up 3bps to 3.07%. The rout in tech stocks continued with further falls in tech and semiconductor stocks as the sell-off that started last week continued. The S&P was down 1.6% for the day and off 4.5% since its peak last week. The NASDAQ fared worse and is down 2% yesterday and 7% from last week’s high point. There was a more modest fall in Europe, with the Eurostoxx down 0.7% yesterday and the FTSE up 0.3%. Oil prices rose globally with Brent up to around $93/barrel while WTI got back to over $90. The EIA (Energy Information Administration) weekly report showed another large decline in US stockpiles, at 7.23mn barrels last week, much bigger than the 2mn expected. However, the report also noted that global oil demand is falling by more than 1mn barrels a day, offsetting some of the disruption caused by the Iran war.

US CPI in May was more or less in line with expectations. Year-on-year CPI increased by 4.2%, up from 3.8% in April, and in line with forecasts. Core CPI came in at 2.9%, again in line with forecasts, but the monthly increase was a bit softer at 0.2%, a little under expectations. The 4.2% headline print is a 3-year high and is outpacing the increase in wages, meaning real incomes are being squeezed. Inflation is very much being driven by energy, unsurprisingly. Gas prices also accounted for more than half of the monthly gain from April. Food prices are also climbing, at the fastest pace in almost four years. There was a limited market impact, as the data was in line with forecasts, and the strong payrolls data had already brought forward pricing for a first Fed hike to December, with the chance of that first hike coming in October edging up to 70%.

The Day Ahead

On the agenda today, we will have the ECB meeting conclusion and rate decision. A 25bps increase taking the deposit rate to 2.25% is a virtual certainty, with the market fully pricing it in. Comments from a range of ECB members have been hawkish, with, amongst others, Nagel saying a June hike was needed ‘unless the outlook improves markedly’ and Elderson saying it was ‘increasingly unlikely’ the ECB can look through the inflation shock. There will be updated staff projections after the meeting, with inflation expected to be revised materially higher for this year and growth forecasts cut. President Lagarde’s statements will be closely watched to see when the next hike may come. Markets are pricing in September, but July is an option, though unlikely, but Lagarde’s comments may provide a clearer guide.

Market Commentary

Hopes for peace in the Iran war were the theme once again yesterday, with very positive news that a peace deal was close seeing oil prices fall further, with the dollar ticking down. However, news late in the day that Iran had allegedly shot down a US helicopter, followed by an exchange of attacks between the US and Iran overnight, saw some of those moves reversed. Brent got down to as low as $90/barrel yesterday, matching a level only hit once since April. Prices edged up a little later on but closed at about $91.50, down over 2% for the day. Brent prices rose a touch overnight but are back to around $91.50 right now on hopes these attacks are limited and peace talks will get back on track. The euro gained ground over the course of the day, rising back above $1.1570 to the dollar before easing back later on to around $1.1550 now. Sterling also rose back to above $1.34 before again dipping back to $1.3380. The euro lost a very small amount of ground to sterling, to 86.3p, a marginal move.

Yesterdays Events

Yields ticked down across the curve. US 10-year yields were down 4bps but remain above 4.5%, while 10-year UK yields were also down 4bps to 4.9%. Ten-year bund yields were down 2bps to 3.04%, with bonds rallying as oil prices fell back. There was a renewed fall in equities on the back of weakness in tech stocks, particularly in the semiconductor sector. Tech stocks had fallen into the end of last week but rebounded on Monday. However, that move proved to be short-lived, with another dip yesterday. The S&P fell 0.3% and the Nasdaq lost 1%.

The US NFIB small business optimism index fell to 95.3 in May, from 95.9 in April and below the consensus expectation of 96. This is the lowest reading since October 2024, with the index erasing almost all of the gains seen since the election of President Trump, which was initially favoured by pro-business groups. Primary concerns driving the drop were rising prices and economic uncertainty. Business owners are struggling with costs, with the net percentage of respondents planning to raise prices up 6 percentage points to 36%, with small businesses particularly concerned about volatile energy costs and planning to pass this onto consumers. Employment plans also deteriorated steeply, with only a net reading of 9% planning to hire, the weakest reading in six years. Investment intentions also fell, showing signs of almost a freeze in small business investment. The uncertainty index, at 91, remains well above its long-term average, with 70% of owners pointing to some sort of supply chain disruption, very likely impacted by the Iran war as well as shifting tariff policies.

The Day Ahead

On the agenda today, the key data will be US inflation, where headline CPI is expected to pick up to 4.2% in May (from 3.8% in April), while core is expected to tick up to 2.9% from 2.8%. Should the print surprise to the upside, combined with last week’s strong payrolls data, this could cause markets to further bring forward expectations of the Fed hiking rates.

Market Commentary

Iranian and Israeli missile attacks over the weekend saw oil open higher yesterday morning, with a barrel of Brent crude initially gaining more than 5% to $98/barrel. However, Iran’s announcement that it had ended its military operation, and news from President Trump that both nations were ‘looking to do’ an immediate ceasefire, saw oil prices reverse course, with Brent crude back to $93/barrel this morning, which is in line with Friday’s close. In FX markets, the news of the weekend escalation further strengthened the dollar, which had already moved significantly higher after Friday’s payrolls data shifted US interest rate expectations, and it traded down towards $1.15 to the euro yesterday morning. However, this support level was not breached, and the move reversed over the afternoon, with the single currency getting back to $1.1540 now, though it’s still lower than the $1.16 levels of last week. Against sterling, the dollar is trading at $1.3360, while EUR/GBP is little changed at 86.4p.

Yesterdays Events

Treasury yields also see-sawed during the day but were ultimately only a little changed. US 10-year yields were up 3bps to 4.55% and 2-year yields were up 1bps to 4.16%, though both are up about 10bps since the start of last week on the back of that strong payrolls data. UK 10-year yields were up 4bps to 4.94% and German 10-year yields were up 2bps.

There are very limited, or no, central bank speakers ahead of central bank meetings (ECB, Fed and BoE) in the next week or so, starting with the ECB on Thursday. However, with the market pricing in a rate hike by year-end, President Trump weighed in over the weekend once again, putting pressure on his new Fed Chair Warsh, saying that a rate hike ‘would be the wrong thing to do’ and calling for lower rates. Meanwhile, in the UK, MPC member Alan Taylor told news media that rates ‘don’t need to go higher because they’re quite restrictive at the moment’, but also that cuts should not be considered until the MPC has ‘more clarity’, strongly suggesting he is firmly in the ‘on hold’ camp.

Equities rose again, taking back some of Friday’s losses. Sharp drops in AI-related stocks at the end of last week took indices down, but the same stocks took back some of that lost ground yesterday, allowing the S&P to close up 0.3% for the day, with the tech-heavy NASDAQ up 0.9%. In Europe, the Euro Stoxx and FTSE were more or less unchanged for the day. Equity markets will be closely watching the outcome of the SpaceX IPO this week, which is the first of some major AI-related IPOs that are in the pipeline.

Very little on the data front, just the New York Fed consumer expectations for May, which suggest inflation is anchored, but the outlook is poor among households. One-year-ahead inflation expectations eased to 3.46% from 3.64% in April, while the three-year and five-year expectations were steady at 3.1% and 3.0% respectively. However, the household financial outlook dropped to the weakest since 2022, suggesting real incomes are being squeezed, while the employment outlook hit its lowest reading so far this year, a contrasting signal compared to the strong payrolls number on Friday.

The Day Ahead

On the agenda today, again little data, with UK retail sales and NFIB small business optimism in the US. Also, there are no central bank speakers, so markets could be moved, by any news from the Middle East.