Once again Donald Trump is agitating markets with customs duties of 30% against Europe and Mexico, announcements made during the weekend and which caused “GAPS” (holes) to the opening of the markets on Monday, with a volatility rebound.
Even if summer is in full swing, the week that opens is particularly rich in important data for the financial markets … but also for the Federal Reserve and Donald Trump.
While the White House attacks against Jerome Powell have not been in intensity in recent weeks, for the Fed to have been lowering its rates, we will know Tuesday afternoon the CPI inflation figures in the United States. And attention will be focused in particular on underlying inflation (“Core CPI”). After two consecutive months at 2.8% in annual variation, a 3.0% rebound is expected by consensus. Jerome Powell and many Fed members have insisted in recent months that they could not resume rate drops due to the uncertainty generated by commercial policy and the risk of rebound in associated inflation.
And the good job report published a few days ago does not offer more argument to the Fed to lower rates (employment being part of Fed’s double mandate with price stability). The inflation figures published on Tuesday will therefore be very important: either they will consolidate the Fed in its status quo posture … or they will give grain to grind to Donald Trump, if they do not show any particular rebound, to continue to accentuate the pressure on the Fed.
If inflation “Core CPI” bounces 3.0% as expected by consensus, it will not be the first time that it will be found at this level in recent years, but outside the post-Cavid period, it is necessary to go back to … 1996 to find American inflation at this level. This is why the Fed remains as vigilant.
The other point of attention of the week will be American consumption: retail sales fell in April (-0.1%) and May (-0.9%). We will know retail sales Thursday for the month of June when consensus awaits a timid rebound of 0.1%. It is an important benchmark for growth dynamics in the United States, which will allow you to see how American consumers behave in this unstable commercial environment and with always too high inflation.
This week’s third point of attention will focus on the results of companies on both sides of the Atlantic. Beyond the results for the past quarter, it is the forecasts for the second semester that will be particularly scrutinized in this business war environment.
And finally, fourth and last point of attention this week, the evolution of commercial negotiations after the new pressure from Donald Trump this weekend.