Daily Points

ON DECK FOR FRIDAY, MAY 30

KEY POINTS:

• Mixed markets face data, USTR action, month-end
• USTR could make trade policy announcements today
• Unelected advisors versus unelected judges
• Canadian GDP may be a last chance to finalize next week’s BoC call
• US core PCE inflation expected to be soft
• Another hot Tokyo core CPI reading…
• …versus another probably soft Eurozone inflation reading

A heavy line-up of data releases will combine with possible announcements from the US Trade Representative and Trump on next steps in tariff wars plus month-end effects to make for a potentially lively end to the week. Peter Navarro—the unelected, troublemaking trade advisor to Trump who complains about the power of unelected judges—had advised that USTR announcements may be forthcoming today or into the weekend. There is also a scheduled press conference between Trump and another unelected former advisor, Elon Musk at 1:30pmET, and then another Trump press conference at 5pmET about the US steel deal. All we need are comments from the other unelected, influential advisors, Stephan Miller and Stephen Miller to complete the richness of criticizing unelected judges! This administration is run by folks who never threw their hats in the ring.

So far, the tentative market action is highly mixed across asset classes. US equity futures are a smidge lower with European cash markets generally higher after a weak session for Asian equities partly due to Bessent’s guidance that trade talks with China have stalled. US Ts are flat while European yields are broadly but gently higher. The dollar is firmer but with some exceptions like the yen on trade concerns and overnight data, and both MXN and CAD that are holding their own ahead of Canadian GDP and maybe on trade hopes.

CANADIAN GDP THE LAST BIT OF THE BOC PUZZLE

Canada refreshes a batch of GDP figures that may be the last chance for markets and consensus to reassess expectations for next week’s BoC meeting (8:30amET). Most expect Q1 growth in the 1½% to 1¾% q/q SAAR range.

Hours worked were up 2% q/q SAAR but several activity readings skewed to the goods side of the economy were soft and it will partly come down to services, plus inventory and import swings that will merit a close eye on final domestic demand. Statcan had previously guided March GDP was looking like 0.1% m/m SA and this will be firmed up. April’s tentative ‘flash’ could be decent with a big gain in hours worked and housing starts plus a small election effect among the reasons.

Key, however, will be two things ahead of the BoC next week. One is whether their expectations for Q1 are in the general ballpark of reality and second will be how data informs which of their two scenarios unfolds going forward (chart 1). Recall the BoC skipped a base case forecast in the April MPR in favour of competing scenarios.

US CORE PCE EXPECTED TO BE WEAK

Today brings out the FOMC’s preferred inflation readings—the price deflators for total consumption and core spending excluding food and energy (8:30amET).

Headline and core PCE prices are expected to be up by 0.1% m/m SA. That would land them both a tick below CPI and core CPI as both core readings have been rather volatile (chart 2). One reason is that a little will be shaved off the CPI estimates by virtue of the different weights used on components in PCE versus CPI. Another reason is that the components from the producer price index that are included in PCE but not CPI will also shave a little off the CPI readings upon translation into PCE.

The year-over-year rates would therefore land at 2.1% for total PCE (from 2.3%) and 2.5% for core PCE (from 2.6%).

A bit of a wrench was thrown into the works by yesterday’s Q1 core PCE revisions. Most had expected the 3.5% q/q SAAR figure to be left flat or revised up a tenth or two but it was surprisingly revised down a tick. We don’t know whether that reflects a downward revision to the way the quarter ended or to an earlier period. This uncertainty could impact the hand-off effect to this morning’s April reading.

Also watch for what are expected to be soft spending figures for April and resilient income growth that month.

ANOTHER HOT TOKYO CORE CPI READING

The yen ignored another hot Tokyo core CPI reading because of its appeal given volatile US trade policy. Tokyo core CPI was up by just shy of 5% m/m SAAR for a third straight month (chart 3). Other readings mixed including industrial output (-0.9% m/m, -1.4% consensus) and retail sales that met expectations at +0.5% m/m while housing starts fell by more than expected.

SOFT EUROZONE CPI REAFFIRMS ECB CUT PRICING

It’s shaping up to be another soft month for Eurozone CPI that merely reaffirmed expectations for another ECB cut next Thursday. The pan-eurozone figures will be released on Tuesday, but here are the figures for the individual countries:

• Italian CPI was up 0.1% m/m and on consensus.
• Spanish CPI was weaker than expected (-0.1% m/m, 0% consensus) with core dipping by more than forecast (2.1% y/y, 2.4% prior, 2.2% consensus).
• German CPI inflation will probably land weaker than the expected 0.1% m/m rise when the national numbers come out a little later this morning (8amET). That’s because the individual states reported soft readings; three were at 0% m/m, one was at 0.1%, one fell by -0.1% and another was up 0.2%.
• We also learned a few days ago that French CPI was weaker than expected at -0.2% m/m (+0.1% consensus).

OTHER OVERNIGHT READINGS

Adding to the dovish Eurozone implications was a soft reading for German retail sales volumes (-1.1% m/m, +0.2% consensus) but much of the miss was explained by revisions to the prior month that was revised up by 1.1% to +0.9%.

The won is among the weakest performers to the USD this morning in the wake of trade uncertainties and a weaker than expected print for industrial production in April (-0.9% m/m, +0.5% consensus).