Macro Week Ahead: US Jobs Data, Fed Chair Powell and Eurozone CPI

The markets and the Fed are set to clash as key US data hits the wires

• Geopolitical fears are easing after an Israel-Iran ceasefire.
• The euro is in play as Eurozone inflation data shapes ECB interest rate expectations.
• The Fed is on a collision course with markets before key US jobs data and the Powell speech.

Pricing out geopolitical risk seemed to take center stage for financial markets last week after the US forced a ceasefire on Israel and Iran after striking the Islamic Republic’s nuclear sites. Crude oil prices tellingly dropped 11.3%, pointing to ebbing supply disruption risk as worries about escalation fizzled.

Stocks roared higher, with the S&P 500 and Nasdaq 100 adding 3.4% and 4.2%, respectively. Treasury bond yields fell across the curve as the drop in crude oil waved off inflation shock concerns. Gold prices fell 2.9% and the US dollar weakened against the euro and the Japanese yen amid easing demand for defensive assets.

Against this backdrop, here are the key macro waypoints to consider in the days ahead.

Eurozone consumer price index data

Inflation in the Eurozone is expected to have moved slightly higher in June. The headline consumer price index (CPI) is seen rising 2% year-on-year, up from 1.9% in May. The core measure excluding volatile food and energy prices is seen holding steady at 2.3%, matching the two-and-a-half year low from the previous month.

The markets expect the European Central Bank (ECB) to issue one more interest rate cut this year, then pause in 2026. Benchmark ESTR futures price in 27 basis points (bps) in further rate cuts through year-end, and a meager 5bps of tightening in 2026. German CPI printed a bit cooler than expected for the same period, but the euro tellingly ignored it.

Fed Chair Powell speaks at ECB Forum

Federal Reserve Chair Jerome Powell is scheduled to speak at the annual ECB central bank forum in Sintra, Portugal. A familiar story highlighting tariff-linked uncertainty in the outlook for inflation as the reason to delay in interest rate cuts seems likely. This would echo what Powell said after June’s rate decision and in testimony to Congress last week.

The disparity between this and what the markets are seeing seems likely to become an increasingly impactful driver for price action. As of this month, the Fed expects 75bps in rate cuts by the end of 2026, with 50bps this year and 25bps thereafter. The markets have priced in nearly 125bps, spread evenly between 2025 and next year.

For their part, traders seem sanguine about inflation and angling for the Fed to shift focus to boosting the economy. Price growth expectations priced in by the bond market — so-called “break-even rates” — resumed falling in mid-May after a brief bounce. They now sit within a hair of the six-month low tagged in late April.

US employment and ISM data

A batch of high-profile US economic data will also feed into explaining why the markets are so dovish relative to the Fed. Analytics from Citigroup show outcomes have tended to disappoint relative to baseline forecasts over the past month, warning that analysts’ models are tuned too rosy. That might set the stage for downside surprises.

The Institute of Supply Management (ISM) is expected to show economic activity growth near standstill for a second consecutive month in June. Manufacturing sector activity is seen shrinking for a fourth consecutive month while the service sector wiggles to life after the first contraction in eleven months in May.

Meanwhile, the Bureau of Labor Statistics (BLS) is expected to report that job creation continued to slow. A rise of 110,000 in nonfarm payrolls is penciled in for June, which would amount to the smallest increase in eight months. The unemployment rate is seen rising to 4.3%, the highest since October 2021.

Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts #Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

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