European FX Outlook: The Eurozone PMI and the UK inflation headline the agenda

What you need to know before markets open

• The US President Donald Trump said there was a “substantial chance” of a summit with North Korean leader Kim Jong Un will not take place as planned on June 12.
• Trump soured the market optimism by plans to impose severe penalties on ZTE Corp amid trade talks with China just one day after Beijing’s announcement that it would cut import tariffs for automobiles and car parts.
• The flash manufacturing and services PMIs headline the morning agenda in France, Germany and the Eurozone with activity in May seen little changed from April.
• The UK inflation data are the headliner of the economic calendar in the UK with inflation expected to decelerate in April, confirming the expectations of the Bank of England laid out in May Inflation Report. For more details read my Preview here. 
• The FOMC meeting minutes are set to disclose details of discussion among policymakers in its last FOMC meeting. For details read Yohay’s Preview here.

Wednesday’s market moving events

• French unemployment rose to 9.2% in Q1 2018 after falling 0.7% in Q4 2017 to 9.0%.
• French flash manufacturing PMI is expected to inch down to 53.7 in May while services are seen decelerating to 57.2 in May.
• German flash manufacturing PMI is anticipated to decelerate to 57.8 in May while services PMI is set to remain unchanged at 53.0 in May.
• The Eurozone flash manufacturing PMI is seen decelerating to 56.0 in May and services to 54.6.
• The RBA Governor Philip Lowe is expected to speak about China's economy, financial system, and the implications for Australia at the Australia-China Relations Institute, in Sydney at 8:00 GMT.
• The UK CPI inflation is expected to decelerate to 2.3% y/y in April from 2.5% y/y in March. For more details read my Preview here. 
• CBI realized sales are seen rising 4% in May, up from -2.0% in April.
• The US new home sales are seen falling 2% m/m in April to 679K.
• The Eurozone consumer confidence is expected to remain unchanged at 0.4 in May.
• The FOMC meeting minutes are due at 18:00 GMT. For details read Yohay’s Preview here.

Major market movers

• Antipodeans NZD and AUD are the biggest losers on Wednesday morning as Trump’s comments hammered previous trade-related optimism.
• Japanese Yen rose as the risk-off mood took place after Trump’s comments.
• Watch EUR reacting to swings in the economic activity with German and the Eurozone PMIs.
• Watch GBP factoring in UK inflation data. For details of how to trade the report with GBP/USD click here. 

Tuesday’s macro summary

• External Bank of England Monetary Policy Committee (MPC) member Gertjan Vlieghe said at his parliamentary reappointment hearing before the Treasury Committee that he is not convinced there has been any change in weak UK productivity growth trend over recent quarters and that his central projection is that one or two quarter-point rate increases will be needed per year over three-year forecast period.
• The UK public sector net borrowing (excluding public sector banks) reached £7.8 billion in April 2018, down £1.6 billion compared with April 2017 and marking the lowest April net borrowing since 2008.
• The Bank of England Governor Mark Carney said before Parliament's Treasury Committee that the UK economy did not evolve in line with February Inflation Report forecasts and the guidance on interest rates the Bank provides is conditioned by economic development, therefore the UK households, as well as businesses, understand that  UK Rates are likely to rise at a gentle pace only. 
• The Confederation of British Industries index of industrial orders fell -3% in May.
• Canada’s wholesale sales reached C$62.8 billion in March 2018, rising 1.1% m/m and more than offsetting the decline in February.
• Richmond Fed manufacturing index increased to 16 in May from -2 in the previous month adding to the set of very strong regional manufacturing activity surveys in the US.