European FX Outlook: Manufacturing PMI is Europe and NFP in the US headline

What you need to know before markets open

• The United States said it would impose tariffs on aluminum and steel imports from Canada, Mexico and the EU. Fears of a global trade conflict receded over the past few weeks, reemerged as countries are ready to retaliate against the US measures.
• Giuseppe Conte will be sworn in as the Italian prime minister along with his cabinet on Friday.
• Spanish Prime Minister Mariano Rajoy is facing a confidence vote scheduled for Friday over a corruption case.
• The manufacturing PMI reports headline the European session with the Eurozone activity seen decelerating after peaking in January this year at 60.6, while the UK manufacturing PMI is also expected to slide lower.
• The US non-farm payroll report is due with strong reading of near 200K expected while wages are expected to accelerate in May.

Thursday’s market moving events

• China’s manufacturing PMI decelerated to 51.1 in May.
• German manufacturing PMI is expected to confirm reading of 56.8 in May.
• The Eurozone manufacturing PMI is expected to confirm reading of 55.5 in May.
• The UK manufacturing PMI is expected to decelerate to 53.5 in May.
• The US Non-farm payroll is seen rising 188K in May with the wages expected to accelerate to 2.7% y/y. For details read Valeria's Preview here. 
• Minneapolis Federal Reserve Bank President Neel Kashkari is expected to participate in a panel discussion on "Collaborative Strategies to Build Tomorrow's Workforce" in Minneapolis at 12:55 GMT.
• The ISM manufacturing PMI is expected to rise to 58.1 in May while prices component is expected to ease to 78.2.

Major market movers

• Euro saw the roller-coaster ride vs the US Dollar with the Eurozone inflation pushing it up, before closing flat on the US tariffs announcement.
• CAD saw a steep fall on Thursday as the first quarter GDP fell short of market expectations and together with the US tariffs move saw Loonie falling.
• Watch GBP to factor in the manufacturing PMI report.
• Watch the US Dollar to take direction on May employment report in the US that is set to provide direction for the Dollar ahead of June rate hike of the Federal Reserve.

Thursday’s macro summary

• China’s state manufacturing PMI rose to 51.9 in May while services PMI increased to 54.9.
• Swiss Q1 GDP increased 0.6% Q/Q while rising 2.3% y/y.
• The UK Nationwide house price index decelerated to 2.4% y/y in May.
• French CPI rose 2.0% y/y in May. 
• Spanish Q1 GDP increased 0.7% Q/Q and 3.0% y/y, in line with expectations.
• Italian unemployment fell to 11.2% in April. 
• The Eurozone inflation rose 1.9% y/y in May driven by oil prices with core inflation accelerating to 1.1% y/y in May.
• The Eurozone unemployment dropped to 8.5% in April.
• Canadian Q1 GDP rose less than expected by 1.3% quarterly annualized.
• The US core PCE price index decelerated to 1.8% y/y in April from 1.9% y/y in May in line with expectations.
• Chicago PMI rose unexpectedly strongly to 62.7 in May.
• Federal Reserve Governor Lael Brainard confirmed that gradual US rate hikes are appropriate in alert to emerging risks aas Fed is ready to adjust as needed. Fiscal stimulus and years of low inflation well below the inflation target mean that gradual rate hikes are warranted.