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EUR/CHF continued to gyrate inside established range last week and outlook is unchanged. Initial bias remains neutral this week first. Rise from 0.9218 might continue, either as a correction to fall from 0.9660, or the third leg of the pattern from 0.9204. On the upside, above 0.9419 will target 0.9445 resistance and above. Nevertheless, on the downside, firm break of 0.9291 will bring retest of 0.9218 low.

In the bigger picture, prior rejection by long-term falling channel resistance (now at 0.9527) retains medium term bearishness. That is, down trend from 1.2004 (2018 high) is still in progress. Firm break of 0.9204 (2024 low) will confirm resumption. This will remain the favored case as long as 0.9660 resistance holds.

In the long term picture, overall long term down trend is still in force in EUR/CHF. Outlook will continue to stay bearish as long as 55 M EMA (now at 0.9919) holds.

Week in Review: Trump Taco, USD indecision and RBNZ Rate decision

This week was once again filled with tradable action in markets.

The week started off with closed US and UK markets, a broadly positive sentiment taking global indices higher in the beginning of the week with the Nikkei 225 leading the charge.

The US Dollar also started the week on a good note, although things have since changed with Wednesday evening Taco Trump headlines: The US Federal Court have cancelled the US President's plan to impose record tariffs on key economic partners.

A picture of the USD performance vs all majors, May 30. Source: TradingView

Indices all around the globe have finished the week green though off their highs. It was a week packed with earnings as we have observed releases for big names such as Nvidia, Dell and Costco who all beat their expectations.

The Nasdaq is beating all US Indices having enjoyed the earnings beats from NVDA and DELL. It is finishing the week up 1.96%

One of the themes that did not help to continue the good news was more uncertainty, as equity markets were on the road to return to their all-time highs though failed to do so.

In the currency space, the US dollar ended up leading—not by strength, but by being the least weak in a choppy week.

The Japanese yen took the biggest hit, following Monday evening remarks from Japan’s Finance Minister that triggered a notable drop in the currency.

We can't forget the biggest headline, the previously mentioned Taco Trump.

This story refers to the U.S. Federal Court’s recent rejection of former President Donald Trump’s trade tariff policies. The court ruled that Trump had overstepped his authority when imposing certain import taxes.

This led to major swings in the Dollar Index as it seesawed above the 100.00 level, then came right back below. The index is closing around 99.40.

For commodities, Gold held around the $3,300 level and stays close to $200 below its all-time high. It seems that the market is awaiting for more news before taking a clear direction. The precious metal still finishes down 2% on the week.

Oil is down almost the same, with fears of higher supply. The price is still constrained between a 60.5 and 64 range.

Bitcoin on the other hand is down above 3.5% on the week, slightly rejecting the all-time highs though prices are still above the key mark of $100,000.

The Week Ahead: May NFP and Rate Decisions for the BoC and ECB

Next week is packed with key data compared to last week. We will see the release of high impact data from the US, China, Canada and Europe. This should be more fuel for volatility, especially if we see any data that provides more clarity on the impact of the most recent Trade Wars.

Asia Pacific Markets Outlook

The week won't be as packed with data for the APAC compared to last week.

We will start off with Minutes from the last RBA Meeting to see if the Australian Central Bank confirms their dovish tone from the May 21 meeting - reminder that they have cut rates by 25 bps at that meeting taking their core policy rate to 3.85%.

We will also see the Caixin Manufacturing PMI Release from China, expected at 50.6, followed by the Services data on Wednesday 4th of June expected at 50.7.

We will observe how tariff menaces impacted the top global exporter.

Finally we are expecting the Australian release for PMIs and Import/Export data.

Do not forget the speech from the BoJ Governor Ueda at 3:50 AM E.T. during the night on Tuesday June 3rd.

Europe, US and UK Market Outlook

Expect a big week for European and North-American markets.

The week starts with PMI Data from Italy, Germany, Canada and the more market-moving US ISM Manufacturing, releasing on Monday June 2nd at 10:00 - Consensus is at 48.7.

Tuesday June 3rd will see the release of the Eurozone CPI which doesn't tend to move markets too much as it is an aggregate of all European countries' CPIs - it may although still impact EUR currency pairs.

Wednesday's most important event will be the Bank of Canada Rate Decision at 9:30, expected to stay put- Rates are at 2.75%.

The Press conference at 10:30 might be more important though to monitor where Governor Macklem is standing regarding his views on the Canadian economy.

We will also have the US Services PMI Release expected at 52.

Thursday we will have the ECB Rate Decision, expected to cut by 25 bps to from 2.4% to 2.15% (Main Refinancing Operations Rate) though the decision is not unanimous. The decision will be out at 8:15 A.M E.T. on the 5th of June.

The rate decision will be followed by mid-tier data from Canada (Ivey PMIs) and the weekly Jobless Claims report.

And to conclude the week, for Friday June 6th, the biggest data will be the release of the US NFP report expected at 130K at 8:30, with the Canadian Jobs data released at the same time and being preceded by Europe Retail Sales at 5:00 E.T.

Most impactful Economic Calendar releases for Next Week

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Safe Trades for the week ahead!

Canadian Highlights

• A U.S. court decision to block U.S. IEEPA tariffs could be a win for Canadian manufacturers if it’s upheld. Still, the U.S. has other legal means to impose tariffs on Canada, and sector-specific ones remain in place.
• Canadian GDP advanced at a reasonably firm 2.2% pace in Q1. However, domestic demand flatlined, reinforcing the narrative that Canada’s economy is softening.
• Markets expect Bank of Canada to hold the line on rates next week, although we still see two more cuts taking place this year as evidence of economic weakness mounts.

U.S. Highlights

• The tariff news felt like a tennis match this week. Tariff threats on the EU were paused. Then a court struck down the IEEPA tariffs, only to have an appeal court say they could remain in place.
• The economic data showed that inflation pressures were steady through April, while consumer spending has been very volatile so far in 2025.
• President Trump also voiced his desire for rate cuts directly to the Fed Chair this week. Powell reinforced his message that the Fed will be guided by the data.

Canada – President Trump, the King, and the BoC

Canadian equities were certainly on their best behaviour the week of King Charles’ visit to open Canadian Parliament – a first for a monarch since 1977. The TSX surged, although this had little to do with the royal visit, but rather improved sentiment after President Trump’s announcement that the deadline for punishing tariffs on the European Union would be pushed back to allow more time for negotiations.

Probably more notable for Canada was a U.S. court’s decision to block tariffs imposed by the U.S. through its International Emergency Economic Powers Act (IEEPA). The tariffs are staying on for now as the U.S. government appeals the decision, but if the IEEPA tariffs are indeed struck down, that would mean the end to the reciprocal U.S. import taxes announced in April and the duties applied in response to fentanyl trafficking. In Canada’s case, this means the 25% tariffs on non-CUSMA compliant items (10% on energy and other critical minerals) would be gone. However, product-specific tariffs are unaffected by the decision, leaving Canadian steel, aluminum and autos still tariffed. What’s more, the U.S. can use other means to impose tariffs, so the global trading system is not out of the woods yet.

Pivoting back to the Monarch’s Canadian visit, his throne speech was largely a reiteration of policies we’ve heard from the federal government. However, he did make the notable point that Canada will be involved with the European Union’s plan to significantly bolster its defense spending. As of now, Canada is targeting an increase in its defense spending to 2% of Canada’s GDP. However, this week’s announcement from NATO that this target for member countries is likely to be raised to 5% could ramp up the pressure on Canada to spend a significant degree more.

Even getting Canada’s defense expenditures from 2.0% to 3.5% of GDP would require about $45 billion per year in additional spending, so this effort could lift economic growth over time. In the here and now, however, the domestic side of Canada’s economy is flagging. This morning’s GDP report showed that while topline economic growth exceeded expectations (driven by tariff-front running) domestic demand was flat (Chart 1). It wasn’t all bad news however, as Statcan’s preliminary estimate pointed to a 0.1% monthly gain in April’s GDP, offering some upside risk to our forecast for a Q2 contraction.

Next week, all eyes will be on the Bank of Canada’s interest rate decision. As it stands, markets expect policymakers to hold the line on rates, especially with a hot core inflation print in April, the federal election bringing the possibility of stimulus, and some global de-escalation in the trade war since the Bank’s last decision in April. On the other hand, Canada’s jobs market is weakening – a narrative reinforced by this week’s payroll data (Chart 2), and domestic activity flatlined in the first quarter. As Canada is likely entering a weak growth period, two more cuts are likely on tap for this year, even if the Bank stands pat next week.

U.S. – Tariff News Tennis Match Continues

Equity markets looked to end the week in the black as the tariff news tennis match seemed to net out on the good news side. The week started with a pause on Trump’s 50% tariff threat against the European Union, then a court struck down some of the Trump administrations’ tariffs before the appellate court deemed they could remain in place for now.

A U.S. trade court invalidated the Trump administration’s use of the International Emergency Economic Powers Act (IEEPA) to levy tariffs. These tariffs include the Canada/Mexico/China “fentanyl” tariffs and the 10% “reciprocal” tariffs. The court ruling has no impact on sectoral tariffs, including those on steel & aluminum and autos. These court battles don’t make it any clearer what will happen with tariffs in the near-term. The administration has other tools they could use to implement tariffs, so this may just be a bump in the road.

The revisions to first quarter economic growth didn’t really change the narrative. The slight contraction in the economy was due to a huge surge in imports, while the domestic economy was still running at a solid 2.5% pace. However, some of that growth was likely due to tariff front-running. These distortions make it harder to get a read on underlying momentum in the economy.

One potential warning sign in the first quarter data was a decline in corporate profits. The drop was seen in nonfinancial firms, which may be a signal that they are coming under pressure. However, April’s personal income data showed that income gains on the household side have been resilient. Incomes were boosted by the implementation of the Social Security Fairness Act, which provided a one-time lift. But even so, wages and salaries continue to grow at a healthy clip. Combined with softer spending growth, the personal savings rate ticked up to its highest level in a year, suggesting consumers have some gas in the tank.

Consumers did take a bit of a breather in April after a solid increase in outlays in March (Chart 1). Consumer spending has been quite volatile so far in 2025, whipsawed by natural disasters and swings in durable goods purchases on things like autos as they try to front run tariffs. This makes it difficult to discern a trend in consumer spending. Even so, we expect that weaker sentiment and a softer labor market ahead will cool the pace of spending in the coming quarters.

The inflation news was steady-as-she goes in April (Chart 2). However, it is a bit early yet to see much inflation pressure from tariffs. We expect inflation will be lifted above 3% later this year as companies pass along higher tariffs to consumers.

President Trump met with Fed Chair Powell for the first time in his second term, reiterating his view that the Fed is making a mistake by not lowering interest rates. Powell stressed that policy decisions would be dependent on the economic data. The Fed minutes from their decision in early May suggested that they are in no hurry to cut rates as they wait for more clarity on the tariff front. Volatility is making it difficult to get clarity on the economic data these days. Add it all up, and the Fed’s wait and see approach is warranted for now.

Summary

United States: Waiting for Clarity

• Uncertainty continues to shape economic data. Personal spending was revised lower in Q1 but rose at a modest pace in April amid sturdy income growth. Inflation also remains in check, but we expect to see a tariff-driven bounce in goods prices in the coming months. Meanwhile, the appetite for large capex is generally weak and the housing market remains on ice.
• Next week: ISM Manufacturing (Mon.), ISM Services (Wed.), Employment (Fri.)

International: Global GDP Growth Galore!

• GDP growth data for the first quarter were released from countries all over the world this week. Canada's figures were somewhat mixed, but showed enough resilience in our view for the Bank of Canada to remain on hold next week. Sweden's growth printed to the soft side, potentially reviving the possibility of one final rate cut from the central bank. Brazil's economy continued to show resilience and India's report was mixed, but solid overall.
• Next week: Switzerland CPI (Tue.), Bank of Canada (Wed.), European Central Bank (Thu.)

Interest Rate Watch: Mortgage Rates Move Back Up

• Mortgage rates are back on the rise. According to Freddie Mac, the average 30-year commitment rate climbed to 6.89% during the week of May 29, the highest level since early February. Stepping back, mortgage rates are little changed over the past year. High financing costs remain a significant constraint on residential activity.

Credit Market Insights: Consumer Balancing Act

• Betting against the U.S. consumer still looks like a losing strategy. Across several surveys, consumer credit fundamentals have stabilized over the past year after marginally weakening throughout 2022-2023.

Topic of the Week: A Bump in the Tariff Road

• A U.S. trade court blocked the tariffs President Trump implemented under the International Emergency Economic Powers Act of 1977 (IEEPA) this week. While this provides tariff-rate relief, there remains considerable uncertainty around the future of trade policy.

Full report here. 

We expect the Bank of Canada will forego an interest rate cut on Wednesday in another close call following April's pause after seven consecutive cuts.

Arguments for a rate cut still remain. Labour markets have weakened, particularly in manufacturing where jobs dropped by 30,600 in April—the largest one-month decline since the pandemic—pushing unemployment to 6.9% from 6.6% in Q1. Housing markets have cooled, reducing the risk that lower rates would reignite surging prices. Gross domestic product growth has remained positive, but the monthly pace slowed sharply after a surge in production in January.

However, the limited data since the BoC’s last decision in April hasn't been entirely negative. Our RBC cardholder tracking shows consumer spending held up better than expected in March and April despite lower survey-based confidence measures.

Friday's Canadian employment report for May (following the BoC decision) will likely show continued weakness in the industrial sector, but recent job postings on Indeed.com suggests hiring demand may be stabilizing. We expect employment to hold steady in May with the unemployment rate remaining at 6.9%.

April’s inflation data also surprised to the upside after accounting for the eliminated consumer carbon tax, driven more by domestic services growth than the impact of tariffs on imports.

Meanwhile, Thursday's international trade data will likely show a widening Canadian trade deficit with exports falling more than imports. U.S. imports plunged 19.8% in April as the U.S. administration imposed reciprocal tariffs on most U.S. trade partners.

Significant U.S. tariffs remain in place. A U.S. court ruling blocking some of the Trump administration’s tariffs (including blanket tariffs on most U.S. trade partners in April) is under appeal, and the tariffs are still in effect for now. But CUSMA-compliant Canadian exports were already exempt from those measures. Sector-specific U.S. tariffs on steel, aluminum and vehicles remain as well, but we estimate more than 86% of Canadian exports still receive duty-free U.S. market access under the current rules.

The BoC has already cut rates by 225 basis points over the past year—more than other central banks. It still has room for further cuts if economic conditions weaken, but will need to consider any government spending support measures, which are better suited to provide targeted, timely, and temporary assistance to affected sectors than interest rate cuts.

Week ahead data watch

We expect U.S. payrolls likely grew by 162,000 in May, slightly down from the 177,000 in April. We also believe the unemployment rate held steady at 4.2%. The details will be closely watched for signs of softening in trade-sensitive sectors like manufacturing, but weekly initial jobless claims have remained low.

The U.S. trade deficit narrowed sharply in April in advance estimates with goods imports plunging 19.8% to retrace a pre-tariff run up, and exports rose slightly by 3.4%. The drop in imports likely partially reflected a reversal of a pre-tariff surge in gold imports, which won’t pass through to GDP measures for Q2. But, imports of autos and (non-auto) consumer goods declined by 19.1% and 32.3%, respectively.

Monday, Jun 2, 2025

Tuesday, Jun 3, 2025

Wednesday, Jun 4, 2025

Thursday, Jun 5, 2025

Friday, Jun 6, 2025

Consumer spending decelerated in April despite a modest acceleration in income growth. Personal income advanced by 0.8% month-over-month (m/m), well ahead of consensus expectations for a 0.3% m/m gain. This strength, however, did not filter through to spending, which cooled to a gain of 0.2% on the month. As a result, the personal savings rate rose to 4.9% - it's highest level in a year.

On an inflation-adjusted basis, spending grew by a modest 0.1% m/m after a particularly strong performance in March. A decline in goods spending (-0.2% m/m) primarily drove this trend, as March's outsized vehicles sales volumes moderated slightly in April. Services spending growth also softened, but remained stable at 0.3% m/m.

Inflationary pressures changed little in April, with core PCE matching the 0.1% m/m gain seen in March. In annual terms, core PCE fell to 2.5% - its lowest level in four years

Key Implications

Consumer spending came off the burner in April as the implementation of reciprocal tariffs weighed on consumer confidence and began to bring an end to the front-loading behavior we had seen in March. Moving forward, we expect consumer spending to grow at a modest pace of 1.8% in the second quarter as the economy continues to adapt to a higher cost environment.

On the price front, we saw the Federal Reserve's preferred inflation metric - core PCE - continue to ease in April. However, moving forward it is likely that the tariff policies in effect will begin to influence consumer prices. We expect that barring an alteration in tariff composition, core PCE will rise above 3% by the second half of this year. The federal court rulings this week against the bulk of the administration's tariffs, while subsequently stayed pending appeal proceedings, adds an additional layer of uncertainty that is likely to prevail over businesses, the labor market, and by extension consumer spending in the months ahead.

Daily Pivots: (S1) 1.1258; (P) 1.1322; (R1) 1.1432; More...

Intraday bias in EUR/USD remains neutral at this point. On the upside, break of 1.1417 resistance will revive the case that correction from 1.1572 has completed at 1.1064. Retest of 1.1572 should then be seen next. Nevertheless, break of 1.1209 will extend the corrective pattern and target 1.1064 support and possibly below.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 55 W EMA (now at 1.0858) holds.

Daily Pivots: (S1) 1.3437; (P) 1.3472; (R1) 1.3529; More...

Range trading continues in GBP/USD and intraday bias remains neutral. With 1.3389 support intact, further rally is expected. On the upside, firm break of 1.3592 will resume larger rally for 100% projection of 1.2706 to 1.3442 from 1.3138 at 1.3874. However, decisive break of 1.3389 will confirm short term topping, and turn bias back to the downside for 1.3138 support instead.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2870) holds, even in case of deep pullback.

Daily Pivots: (S1) 143.34; (P) 144.81; (R1) 145.66; More...

Intraday bias in USD/JPY stays neutral at this point. On the upside, above 146.27 will target 148.64 resistance first. Firm break there will resume the rebound from 139.87. Nevertheless, break of 142.10 will bring deeper fall back to 139.87 low.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.