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Eurozone PMI manufacturing finalized at 49.4, recovery progressing

    By
    ActionForex
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    Eurozone PMI manufacturing was finalized at 49.4 in May, up from April’s 49.0 and marking the highest level in 33 months.

    Production increased across all four major economies: Germany, France, Italy, and Spain, supporting economist Cyrus de la Rubia’s view that the recovery is gaining traction.

    De la Rubia also noted that output has now risen for three straight months, reinforcing the view that the recovery is gaining traction. Historical data suggests a 72% chance of another output increase next month.

    Falling input costs, driven by lower energy prices, have enabled manufacturers to cut selling prices again, offering the ECB more flexibility for its expected interest rate cuts.

    However, the outlook remains clouded by external risks, particularly the threat of higher US tariffs on EU goods. Any escalation in transatlantic trade tensions could quickly derail the fragile rebound.

    Full Eurozone PMI manufacturing final release here.

    Swiss GDP grew 0.5% in Q1, pharma exports surge on tariff frontloading

      By
      ActionForex
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      Switzerland’s GDP expanded by 0.5% qoq in Q1, beating market expectations of 0.4% qoq. When adjusted for the impact of major sporting events, GDP growth came in even stronger at 0.8% qoq. The State Secretariat for Economic Affairs noted that the services sector posted broad-based gains and domestic demand remained firm, contributing to the overall solid performance.

      A standout was the chemical and pharmaceutical sector, which surged 7.5% in the quarter, driven by a sharp rise in pharmaceutical exports. This lifted overall manufacturing output by 2.1% and goods exports by 5.0%. Notably, exports to the US jumped significantly, suggesting possible front-loading in anticipation of evolving US trade policy.

      Full Swiss GDP release here.

      Japan’s PMI manufacturing finalized at 49.5, firms eye recovery despite trade headwinds

        By
        ActionForex
        -

        Japan’s PMI Manufacturing was finalized at 49.5 in May, up from April’s 48.7. S&P Global’s Annabel Fiddes noted that business conditions “moved closer to stabilisation,” as declines in sales eased and firms reported improved hiring activity.

        Global trade tensions stemming from US tariffs continue to weigh on demand, with businesses citing “increased client hesitancy” and weaker orders.

        Despite persistent external challenges around tariffs, sentiment around future output improved, and hiring rose at the fastest pace in over a year.

        Full Japan PMI manufacturing final release here.

        China’s NBS PMI Manufacturing edges higher to 49.5, second month of contraction

          By
          ActionForex
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          China’s official NBS PMI Manufacturing rose from 49.0 to 49.5 in May, signaling a modest improvement but still marking the second consecutive month of contraction.

          The lift was driven by an acceleration in production and more optimistic business sentiment. The production sub-index climbed 0.9 pts to 50.7. New orders index increased from 49.2 to 49.8. New export orders also rebounded from a low base of 44.7 to 47.5, as some firms reported improved trade activity with the US.

          Meanwhile, PMI Non-Manufacturing edged slightly lower from 50.4 to 50.3, lifting the PMI Composite to 50.4 from 50.2. Although still in expansion territory, the composite figure is consistent with the sluggish momentum seen over the past year.

          Fed’s Waller: Temporary tariff effects could clear path for “good news” rate cut later this year

            By
            ActionForex
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            In a speech today, Fed Governor Christopher Waller struck signaled his support for “good news” rate cuts later this year, if inflation continues to ease and trade tensions don’t escalate significantly.

            In his view, any inflation resulting from tariffs “will not be persistent” and he supports “looking through” these effects when considering policy decisions.

            Waller added that the strong labor market and continued disinflation through April give the Fed time to assess the outcome of ongoing trade negotiations before making policy moves.

            Should tariffs remain near his “lower scenario” and inflation continue its downward path toward 2%, Waller said he would support so-called “good news” rate cuts, easing driven by a stable economy rather than distress.

            Full speech of Fed’s Waller here.

            Canada GDP expands 0.1% mom in March, another 0.1% mom in April

              By
              ActionForex
              -

              Canada’s GDP grew by 0.1% mom in March, in line with market expectations. Strength in goods-producing industries continued to support overall output. The sector expanded by 0.2%, marking its second lead contribution in the past three months.

              Services-producing industries also edged higher by 0.1%. In total, 9 out of 20 sectors posted growth.

              Looking ahead, preliminary data from Statistics Canada suggests another 0.1% increase in real GDP for April.

              Full Canada’s GDP release here.

              US core PCE inflation cools to 2.5%, income surges

                By
                ActionForex
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                US headline PCE price index rose 0.1% mom in April, in line with expectations, while annual inflation slipped from 2.3% yoy to 2.1% yoy, below the consensus of 2.2%.

                Core PCE, Fed’s preferred inflation gauge, also rose 0.1% mom and slowed from 2.6% yoy to 2.5% yoy, matching expectations. The data supports the view that disinflation remains intact, though the pace of moderation remains modest.

                At the same time, personal income data surprised to the upside, jumping 0.8% mom or USD 210.1B, well above the expected 0.3% mom. Personal spending rose a more modest 0.2% mom, matching forecasts.

                Full US personal income and outlays release here.

                ECB’s Panetta signals diminished room for further rate cuts

                  By
                  ActionForex
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                  Italian ECB Governing Council member Fabio Panetta said today that while the central bank has made meaningful progress in easing monetary policy, bringing the deposit rate down from 4% to 2.25%, “the room for further rate cuts has naturally diminished”.

                  “However, the economic outlook remains weak, and trade tensions could lead to a deterioration,” he added. “It will be essential to maintain a pragmatic and flexible approach, considering liquidity conditions and the signals coming from financial and credit markets.”

                  Panetta also highlighted the high-stakes nature of ongoing trade talks between the EU and the US, warning that even tensions are likely to have a “significant impact” on the region’s economy.

                  BoE’s Taylor: Global headwinds justify lower monetary policy path

                    By
                    ActionForex
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                    BoE MPC member Alan Taylor reinforced his dovish position in an interview with the Financial Times, highlighting growing downside risks to the UK economy from global developments.

                    Taylor, who alongside Swati Dhingra voted for a larger 50bps rate cut in May, argued that monetary policy should be on a “lower policy path” given the accumulating headwinds.

                    He specifically pointed to impact of Trump’s tariffs on imports would “be building up over the rest of this year in terms of trade diversion and drag on growth”.

                    While UK inflation unexpectedly jumped to 3.5% in April, Taylor downplayed the significance of the rise, attributing it to “one-time tax and administered price changes.”

                    Swiss KOF rises to 98.5, but growth outlook remains subdued

                      By
                      ActionForex
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                      Switzerland’s KOF Economic Barometer edged up to 98.5 in May from 97.1, marking a modest improvement in economic sentiment. While the uptick is a positive signal, the barometer remains below its long-term average, suggesting that the broader outlook for the Swiss economy “remains subdued”.

                      According to the KOF, the manufacturing sector showed notable strength, contributing to the overall improvement. However, indicators tied to foreign demand and private consumption remain under pressure, highlighting the ongoing drag from weak external conditions and cautious domestic spending.

                      Full Swiss KOF release here.

                      RBNZ’s Silk: Data to guide timing and need for further cuts

                        By
                        ActionForex
                        -

                        RBNZ Assistant Governor Karen Silk said that interest rates are currently within the estimated neutral band of 2.5% to 3.5%.

                        She noted that the full impact of previous easing has yet to filter through the economy, making any future adjustments highly dependent on incoming data.

                        The OCR track indicates “whatever we do is going to be data-dependent, and then we will be looking to the data to help us to decide when or if we cut further from here,” she added.

                        Australia retail sales down -0.1% mom in April, weighed by weak clothing demand

                          By
                          ActionForex
                          -

                          Australia’s retail sales turnover unexpectedly declined by -0.1% mom in April, missing expectations for a 0.3% mom rise. On an annual basis, sales were up 3.8% compared to April 2024/

                          The Australian Bureau of Statistics noted that the decline was driven primarily by reduced spending on clothing. The weakness was partly offset by a rebound in Queensland, where businesses recovered from disruptions caused by ex-Tropical Cyclone Alfred in March.

                          Full Australia retail sales release here.

                          Japan’s industrial production falls -0.9% mom in April, but May rebound expected

                            By
                            ActionForex
                            -

                            Japan’s industrial production fell by -0.9% mom in April, a milder decline than the expected -1.4%. The Ministry of Economy, Trade and Industry maintained its view that production “fluctuates indecisively,” reflecting ongoing uncertainty, particularly around global trade developments.

                            While the ministry said the impact of US tariffs was limited in April, some firms have voiced concern about the manufacturing outlook as policy risks persist.

                            The breakdown of the data shows a mixed picture: six of 15 industrial sectors saw declines, including production machinery, fabricated metals, and transport equipment excluding motor vehicles. However, eight sectors recorded gains, with electronic parts and business-oriented machinery showing notable strength.

                            Manufacturers surveyed expect a sharp 9.0% rebound in May, followed by a -3.4% dip in June.

                            Also released, Japan’s retail sales grew by a stronger-than-expected 3.3% yoy in April, outpacing the consensus of 2.9% yoy. Meanwhile, the unemployment rate remained steady at 2.5%.

                            Tokyo core inflation accelerates to 3.6%, driven by food and services costs

                              By
                              ActionForex
                              -

                              Tokyo’s core CPI (excluding fresh food) accelerated to 3.6% yoy in May, up from 3.4% yoy and above market expectations of 3.5% yoy, marking the fastest pace since January 2023. This marks the third consecutive year that core inflation has exceeded the Bank of Japan’s 2% target.

                              While headline CPI ticked down slightly from 3.5% yoy to 3.4% yoy, the underlying core-core measure (excluding food and energy) also edged up fro 2.0% yoy to 2.1% yoy, suggesting broad-based inflation persistence.

                              The surge in non-fresh food prices, up 6.9% yoy, remains a dominant driver—highlighted by a staggering 93.2% yoy jump in rice prices.

                              Another notable development is the uptick in services inflation, which climbed to 2.2% yoy from 2.0% yoy , indicating that businesses are beginning to pass on higher labor costs.

                              Fed’s Logan: Policy well positioned, ready to respond to shifting risks

                                By
                                ActionForex
                                -

                                Dallas Fed President Lorie Logan said overnight that with inflation “trending gradually back to target”, the labor market “holding strong”, and risks to Fed’s dual mandate are “roughly balanced.

                                Speaking at an event, Logan emphasized that “monetary policy is in a good place”, and there is no immediate need for a policy shift.

                                Logan also highlighted the potential impact of fiscal policy and regulatory changes, noting they could stimulate investment and consumer demand, while elevated economic uncertainty or financial volatility might dampen activity.

                                Fed’s Daly: Modestly or moderately restrictive policy still needed

                                  By
                                  ActionForex
                                  -

                                  San Francisco Fed President Mary Daly, in a Reuters interview, emphasized that above-target inflation remains her “focus” while the labor market is in “solid shape”.

                                  With inflation still running above the Fed’s 2% target and uncertainty around the pace of its decline, Daly said it’s appropriate for monetary policy to remain in a “modestly or moderately restrictive” stance to guide inflation back to target.

                                  Daly added that she’s closely watching for any signs of labor market weakening but hasn’t observed such signals yet. At the same time, she remains attentive to whether inflation continues to gradually ease or risks becoming sticky or re-accelerating.

                                  BoE’s Bailey stresses caution on rate cuts amid inflation surprises and trade uncertainty

                                    By
                                    ActionForex
                                    -

                                    BoE Governor Andrew Bailey emphasized the need for a “gradual and careful” approach to future interest rate cuts in light of lingering global trade uncertainty and its impact on domestic inflation.

                                    His comments follow last week’s stronger-than-expected inflation data, which showed UK CPI jumping to 3.5% in April from 2.6%. Bailey noted it remains unclear how much of the increase is due to seasonal factors, and said the BoE will closely examine the next set of inflation data ahead of its June policy decision.

                                    Bailey acknowledged that while core inflation is “gradually grinding down”, the pace of improvement remains sluggish. He also highlighted a renewed rise in food price inflation, which—although not unique to the UK—has a significant influence on public inflation perceptions.

                                    US initial jobless claims rise to 240k vs exp 230k

                                      By
                                      ActionForex
                                      -

                                      US initial jobless claims rose 14k to 240k in the week ending May 24, above expectation of 230k. Four-week moving average of initial claims fell -250k to 231k.

                                      Continuing claims rose 26k to 1919k in the week ending May 17, highest since November 13, 2021. Four-week moving average of continuing claims rose 3k to 1890k, highest since November 27, 2021.

                                      Full US jobless claims release here.

                                      RBNZ’s Hawkesby: OCR in neutral zone, July cut not a done deal

                                        By
                                        ActionForex
                                        -

                                        RBNZ Governor Christian Hawkesby stold Bloomberg TV today that another rate cut at the July meeting is “not a done deal” and “not something that’s programmed.”

                                        With the OCR at 3.25% after this week’s reduction, it’s now sitting within the estimated neutral range of 2.5% to 3.5%. Hawkesby emphasized the central bank has entered a phase of “considered steps,” guided closely by incoming data rather than a preset easing path.

                                        He acknowledged rising uncertainty, noting that near-term growth headwinds have intensified and both demand and inflation pressures are weaker than they were back in February. He also highlighted the uncertainty surrounding global trade policy, particularly tariff developments, which could play out in various ways.

                                        NZ ANZ business confidence falls to 36.6, supporting case for further RBNZ easing

                                          By
                                          ActionForex
                                          -

                                          New Zealand’s ANZ Business Confidence index dropped sharply in May, falling from 49.3 to 36.6. Own Activity Outlook, a key indicator of firms’ expectations for their own performance, declined to 34.8 from 47.7.

                                          Profit expectations also plunged to 11.1, indicating mounting pressure on margins. Although cost and wage expectations eased slightly, they remain elevated, while inflation expectations edged up from 2.65% to 2.71%.

                                          According to ANZ, the survey paints a mixed picture: the economy is in recovery mode, but businesses continue to face tough operating conditions, particularly in passing on cost increases. The data reinforces the view that RBNZ can afford to support growth through further rate cuts, barring any major inflation or data surprises.

                                          ANZ expects the OCR to eventually fall to 2.5%, as global headwinds and domestic fragilities persist.

                                          Full NZ ANZ business confidence release here.

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