Markets: Politics to remain at the fore front – Rabobank

Analysts at Rabobank suggest that with holidays in both London and New York, today is data light with global politics likely to take centre stage.

Key Quotes

“In Europe, we have (amongst others) PPI data from Italy -which came in weaker than the prior month, in line with the April dip in HICP inflation- and retail sales data for Ireland and consumer and business confidence data from Finland.”

“During Europe’s night, we’ll see some data on the Japanese labour market, with the jobless rate and job-to-application ratio’s coming out. The former is expected to be 2.5% and the latter 1.6, both reflective of the very tight labour market in Japan, which nonetheless has not led to substantial wage inflation. We don’t expect a sudden change in Japan’s labour market tightness, but do note that markets’ constant speculation about when the Bank of Japan will start exiting its ultra-loose monetary policy will likely overshoot on each surprise in the data.”

“There will be no data for the US today. Rather, markets will be eyeing Wednesday when we’ll see ADP employment changes, which will give a glimpse into the closely monitored employment report coming out on Friday.”

“Although not on any economic agenda, markets will also likely keep an eye out for the Turkish lira, which depreciated heavily last week since investor sentiment towards Turkey has been souring as the economy is overheating with double digit inflation, declining foreign reserves, a deteriorating current account and a president who keeps saying that interest rates are too high.”

“The 300bp emergency rate hike has brought some stability to the currency, but all eyes are on the CBRT meeting next week. This week could very well continue to be a rough ride for the lira as markets speculate on whether and how much the Turkish central bank will hike rates at its scheduled monetary policy meeting on 7 June.”