US PCE inflation, which is the FOMC's preferred inflation measure, is due to be released. We expect the PCE core to increase to 1.5% y/y and we see upside risk to our forecast.
The first set of information about euro inflation in June is due with the German and Spanish figures. We expect the German HICP to increase slightly to 0.7% y/y.
In the euro area, we expect manufacturing PMI to decline further due to the global weakness in Q1 whereas the domestic-driven service PMI should increase.
We expect the Chinese Markit/HSBC manufacturing PMI to improve to 50.0 in June after increasing in the two previous months.
In Japan, manufacturing PMI, retail sales and inflation figures should give a better idea on the economy's ability to weather the April hike in consumption tax.
Global macro and market themes
The Fed continued its dovish tone at the FOMC meeting despite the recent higher core inflation data. This leaves the mix of a very accommodative monetary policy and strengthening recovery in place, which is an optimal mix for risk assets.
Bond yields fell back on the back of the Fed message despite by the end of 2016 the market now having a gap of 70bp to the Fed projection. The soft message also paused the recent downward trend in EUR/USD.
Peripheral bond yields have seen some correction higher this week but this should be seen in the light of the very strong performance following the ECB meeting. The recovery in the periphery continues and consumer confidence is very high.
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