This week
Ironically many on the continent won’t remember the UK entry for Eurovision a few weekends back, “Remember Monday”, which came in at a disappointing 19th in the standings. However, give it a week, and economists in Europe certainly will now.
Having announced on Friday (23rd of May) that he was recommending a straight 50% tariff on goods from the European Union starting on the 1st of June, saying the EU has been hard to do business with, US President Donald Trump carried on his erratic trade policy into the weekend. With European markets understandably bearing the brunt of selling after the announcement, it was only right that they recouped all those losses after the bank holiday, following the news that Trump had gone back on his threat the day before (Monday the 26th of June).
It was certainly a Monday to remember as Trump restored the original 9th of July deadline to allow for talks between Washington and the 27-nation bloc, after an amicable call with European Commission President Ursula von der Leyen. “We had a very nice call, and I agreed to move it, she said we will rapidly get together and see if we can work something out", Trump said shortly afterwards.
After the announcement, the euro hit its highest level against the dollar since the end of April, while European shares surged.
It was very much “nul points” for Donald Trump and his tariffs later on in the week though, as a US federal court found the president overstepped his authority by imposing across the board duties on imports from US trading partners. The Court of International Trade said the US Constitution gives Congress exclusive authority to regulate commerce with other countries that is not overridden by the president's emergency powers.
This now means that each of the 10% global baseline tariffs announced during Trump’s “Liberation Day”, the paused reciprocal tariffs, the fentanyl-related tariffs on Mexico, Canada and China, and the threatened 50% tariff on the EU, are affected by the ruling.
It was very much Save All Your Kisses for Me as markets fell back in with the world’s largest company and AI bellwether, Nvidia, who reported a 69% surge in quarterly sales this week. It jumped 5% on the news that it beat earnings expectations, whilst customers stockpiled its AI chips before fresh US curbs on China exports took effect. Though unlikely to make up for the potential loss in Chinese revenue, a spate of new deals that Nvidia signed earlier this month in the Middle East could offer fresh avenues of growth with the UAE looking to use five gigawatts’ worth of AI infrastructure in the future.
On the domestic data front, it was Gina G’s 1997 Eurovision dancefloor filler Ooh Aah... Just a Little Bit that came to mind as the British Retail Consortium (BRC) released its latest Shop Price Index. The index measures the change in the price of goods purchased at BRC-member retail shops. Although on a month-on-month basis prices fell just slightly overall, -0.1%, food price inflation accelerated, potentially warning that price pressures are on the rise again. On an annual basis, prices rose by 2.8%, up from 2.6% for April. Much of the additional cost was attributed to a new packaging tax and higher minimum wage and NIC costs being passed on to the consumer.
Coupled with higher-than-expected CPI inflation data released last week, it seems investors are increasingly pricing in less rate cuts from the Bank of England going forward: previously two rate cuts were anticipated, and now predictions are for one. It all seems a bit reminiscent of Bucks Fizz, as markets are Making Their Mind Up pretty rapidly…
Next week
As May transitions to June, it is worth remembering that the name June is a relatively recent nomenclature, displacing the Old English word for the month, ærra liþa, as recently as the 17th century. Whilst there are many theories as to what the “liþa” part of the word meant, it is generally agreed that the word translates to something similar to 'calm', or 'navigable' referring to the serenity of the breezes, and the how pilotable the waters are during the month.
After the relative volatility of the previous months, investors will be hoping that June does live up to its past name, providing a level of calmness for markets as we navigate the summer months. The first ripples should be felt on Monday as a range of Purchasing Managers’ Index (PMI) readings arrives. Covering the important Manufacturing sector for Germany, France and an overall European composite, the data will also cover the UK and US.
The readings will give us an invaluable sense of the global economy at a company level, as businesses will be asked to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries and inventories.
Not wanting to rock the boat too much, the second half of the week provides us with nearly every major central bank chief giving a press conference, from Jay Powell of the US Federal Reserve to Kazuo Ueda of the Bank of Japan. Investors should have a much more comprehensive view of how the world’s top financiers are viewing the economy.
However, it is Christine Lagarde of the European Central Bank (ECB) that could take centre stage, widely expected to cut rates on the continent again by a further 0.25%. However, the discussion could be more heated than many investors believe. Whilst nearly fully priced in by the market and with plenty of reasons for the ECB to continue cutting rates, the central bank’s more hawkish members will no doubt find some arguments for putting their foot on the brakes. Projections for the Eurozone now show inflation dropping below 2% this year, roughly one year earlier than predicted in the March forecasts and will make for a fascinating insight when Lagarde comes to give the bank’s view on future rate policy.
The first Friday of the month usually signals Non-Farm Payrolls (NFP) data for the US, measuring the number of Americans who were added to the labour force during the previous month. NFPs are highly regarded by the US Federal Reserve and we should expect heightened market volatility during its release.
The data itself will be accompanied by Average Hourly Earnings, helping us gauge future inflation expectations as the more consumers earn, the more they tend to spend. It all combines to be a vital piece of data for the Federal Reserve and should take on added significance with the labour market having shown further signs of deterioration during the last month or so, largely owing to trade uncertainties ushered in by the Trump administration.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used, you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 30th May 2025.