After a turbulent week dominated by escalating trade tensions and legal wrangling over tariff policies, global markets now turn their attention to a packed calendar of economic events. From pivotal central bank meetings to fresh US labour market data, this week has the potential to redefine near-term expectations for monetary policy, currency trends, and risk appetite.
While markets continue to digest the implications of former President Donald Trump’s renewed tariff threats and legal setbacks, investors will also focus on the European Central Bank’s expected rate cut, the Bank of Canada’s policy stance, and critical employment data from the United States. The landscape is further complicated by underlying concerns over global growth, inflation, and political uncertainty, all of which continue to shape sentiment across asset classes.
Let’s break down the week’s major developments and what market participants should keep an eye on, day by day:
📅 Monday, 2 June 2025
US-China Trade Escalation Commentary:
- The week begins under a cloud of uncertainty following former President Trump’s comments last Friday, in which he accused China of breaching a trade agreement. Although no specifics were given, the assertion sparked concerns about a potential return to a more confrontational US-China economic stance.
ISM Manufacturing PMI (May, US):
- Investors will scrutinize the latest gauge of manufacturing activity to assess how tariff threats and slowing global demand are impacting industrial sentiment. Any signs of weakness could add to fears of decelerating economic momentum in the US.
📅 Tuesday, 3 June 2025
US Job Openings (JOLTS) – April:
- A key barometer of labour market strength, this report offers insights into employment demand. A notable decline could signal cooling hiring intentions, particularly relevant ahead of Friday’s headline employment report.
📅 Wednesday, 4 June 2025
Bank of Canada Policy Decision:
- The BoC is widely expected to keep its key policy rate unchanged at 2.75%. Despite mounting expectations for global easing, Canada’s stubborn core inflation and resilient GDP growth are likely to keep the central bank cautious for now.
- No new economic projections are due at this meeting, so attention will fall on the accompanying statement and press conference for any signs of dovish tilt or forward-looking concerns.
ISM Services PMI (May, US):
- This measure of economic activity in the services sector, which comprises a majority of US GDP, will help clarify whether business confidence has been affected by rising trade tensions.
ADP Employment Report (May, US):
- This early snapshot of private-sector hiring trends will be used as a guidepost for Friday’s official nonfarm payrolls release. A sharp deviation from expectations could stir volatility in currency and equity markets.
📅 Thursday, 5 June 2025
European Central Bank Rate Decision and Press Conference:
- The ECB is widely expected to reduce rates by 25 basis points, marking its eighth cut since beginning its easing cycle in mid-2024. The deposit rate is projected to fall to 2.00%, and the refinancing rate to 2.15%.
- Market focus will centre on the ECB’s updated macroeconomic projections, especially inflation and growth forecasts. Any downward revisions would reflect the growing consensus that the eurozone economy remains under disinflationary pressure.
- Internal division among ECB Governing Council members may also emerge, with some favouring continued easing while others argue for caution. The tone of President Lagarde’s press conference could offer clues about the future trajectory of policy.
US Weekly Jobless Claims:
- This high-frequency labour data offers a near-real-time view of labour market stress. The previous week saw higher-than-expected filings for both initial and continuing claims, potentially reflecting early impacts from policy uncertainty and slower hiring.
📅Friday, 6 June 2025
US Nonfarm Payrolls Report (May):
- Arguably the week’s most anticipated release, the NFP report is expected to show a significant slowdown in job creation. Consensus forecasts suggest a gain of 130,000 jobs, down from 177,000 in April.
- The unemployment rate is expected to remain unchanged at 4.2%, while average hourly earnings are forecast to rise modestly month-over-month, though the annual pace of wage growth may slip to 3.7%.
- Any deviation from expectations—especially signs of weakening job growth or wage stagnation—could intensify speculation about an interest rate cut from the Federal Reserve in July.
US Tariff Policy and Legal Uncertainty:
- Former President Trump reignited trade tensions by proposing a sweeping 50% tariff on EU imports, though this was temporarily deferred after talks with EU Commission President Ursula von der Leyen. The new deadline has been pushed to July 9.
- Midweek, the US Court of Trade invalidated most of Trump’s previous global tariff actions under the IEEPA statute, delivering a blow to his trade policy agenda. However, a subsequent federal appeals court ruling granted a temporary stay, allowing tariffs to remain in place pending appeal.
- Trump has made it clear via his Truth Social platform that he sees the court ruling as politically motivated and vowed to pursue alternative avenues to impose duties if needed. Market participants remain wary of heightened legal and political volatility around US trade actions.
ECB Outlook and EUR Direction:
- With eurozone inflation gradually approaching the ECB’s 2.0% target and growth expectations softening, the central bank appears poised to reaffirm its dovish stance. Inflation in key economies like Germany and France continues to moderate.
- The euro may find support if the ECB signals that the easing cycle is nearing its end, especially in contrast with the US, where markets still expect further monetary accommodation.
- Any perceived convergence between US and eurozone policy paths could trigger renewed demand for the euro, particularly if the ECB suggests that fewer cuts lie ahead than previously expected.
Bank of Canada Caution Amid Stronger Data:
- Canadian policymakers are confronting conflicting signals: while inflation remains uncomfortably high, recent GDP figures show economic activity holding firm. This gives the BoC reason to pause and reassess rather than act prematurely.
- The Canadian dollar could see some tailwinds if the BoC maintains its current rate and hints at a longer pause, particularly against a backdrop of potential US rate cuts later this year.
Federal Reserve’s Delicate Balancing Act:
- The Fed has emphasized a “wait-and-see” stance, seeking greater clarity on inflation dynamics and employment trends before adjusting policy. However, rising downside risks—particularly from trade policy disruptions—may increase pressure on the central bank to respond.
- Markets are currently pricing in two rate cuts by year-end, beginning in September, though any surprises in upcoming data could shift expectations dramatically.
Summary Outlook:
This week represents a critical intersection for markets, combining geopolitical uncertainty, major central bank decisions, and pivotal economic data. While rate decisions from the ECB and BoC will shape regional expectations, it is the US jobs report that may have the most far-reaching implications—especially as the Federal Reserve weighs its next steps in a volatile and unpredictable global environment.
Investors should remain vigilant for signs of economic deceleration, unexpected policy shifts, or further deterioration in global trade relations—all of which have the potential to significantly influence cross-asset price movements and shape the broader macroeconomic narrative heading into the summer.
