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The main data events Tuesday include the European Commission's Economic Sentiment Indicator at 1000BST, followed by German inflation at 1300BST. In the US the consumer confidence index at 1500BST will be closely watched.
EZ ESI projected seen at almost 21-year high
The EZ ESI is forecast to rise further in June to 116.5, up from 114.5 recorded in May. This would mark the fifth consecutive gain and the highest level since August 2000. May's uptick was broad-based with every category posting a monthly gain. Especially service sector sentiment rose sharply, boosted by the continued easing of restrictions. The progress in vaccinations and the further easing of restrictions provides a boost to economic and consumer sentiment and indicates an upside risk in June. The recently released flash composite PMI also jumped to a 180-month high in June on the back of the reopening effect.
German inflation projected to decelerate slightly
German inflation is expected to tick down slightly in June to 2.1% from 2.4% recorded in May. Energy prices, which were the main driver in the previous month, are likely to continue to have a strong positive impact on price growth, but to a lesser extent than in the previous month. Recently rising costs for raw martials and intermediate goods are soon likely to have an impact on consumer prices as well. Survey evidence suggests that output price inflation is increasing in addition to input prices inflation, as firms pass on the higher costs. Looking ahead, inflation is likely to rise again in July due to base effects resulting from the reversal of the VAT cut which was introduced in July 2020 and ended at the end of 2020.
Source: Destatis
US consumer confidence forecast to edge higher
Consumer sentiment in the US is expected to tick up to 119.0 in June, following a small 0.3-point dip to 117.5 in the previous month. May's downtick was led by a decline of the Expectations index from 107.9 to 99.1, while the Present Situations index increased 12.4 points to 144.3. The report noted that consumers were concerned about rising inflation, a softening of the labour market and decelerating growth, which led to a drop in optimism about the outlook. Similar survey evidence is in line with market forecasts. The Michigan consumer sentiment index rose in June following a decrease in May and posting the second highest reading since the start of the pandemic.
The events calendar remains quiet on Tuesday with the only highlights being speeches by Richmond Fed's Tom Barkin and ECB's Christine Lagarde.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.