Market Analysts Focus On ECB Rate Decision And US NFP Report

As June’s first week is near its finish, economists wait for the European Central Bank’s (ECB) interest rate decision on Thursday and the US Nonfarm Payrolls report for the month of May on Friday.

In Australia, economic growth barely escaped the standstill in the first quarter of this year with Reserve Bank of Australia (RBA) Governor Michele Bullock telling members of the Senate, just before the report release, that she didn't expect GDP to increase.

ECB Interest Rate Decision

The ECB’s governing board will convene on Thursday to decide on monetary policy and interest rates. The majority of economists believe that the ECB will lower interest rates by 25 basis points after its council meeting. However, analysts will be expecting to read the post-meeting statement and comments from policymakers to get more clues regarding rate trajectory in the next months.

Eurozone inflation rose by 2.6% year on a yearly basis in May, turning away from the ECB's 2% target after increases of 2.4% in the previous two months, according to Eurostat's flash estimate.

Analysts at S&P Global Market Intelligence said that "we think that the latest inflation and wage figures decrease the likelihood of back-to-back interest rate cuts in July, but we see the ECB cutting rates twice more before the end of the year if the downward trend in inflation resumes during the third quarter as expected."

Between July 2022 and September 2023, the ECB raised interest rates by 450 basis points, tightening its monetary policy, an action that contributed to bringing down the headline inflation rate in the eurozone from a peak of 10.6% in October 2022 to 2.6% in May 2024. 

US Nonfarm Payrolls (NFP) May 2024 Report

On Friday, May’s US Nonfarm Payrolls (NFP) report will be published by the Bureau of Labour Statistics (BLS). Market analysts suggest that the NFP figure could come in at 190,000, spiking from the 175,000-figure recorded in April. Some of them even say that if the forecast is to be confirmed, the Fed could consider pushing the expected first rate cut later in November. The NFP report is considered by the Fed’s Federal Open Market Committee (FOMC) when setting interest rates.

The BLS published on Tuesday its Job Openings and Labor Turnover Survey, or JOLTS report. The report showed that job openings, a measure of labour demand, fell by 296,000 to 8.059 million in April, the lowest level since February 2021. 

Australian GDP Barely Grows In Q1 2024

Australia's economy expanded by just 0.1% in the first three months of the year, according to an Australian Bureau of Statistics (ABS) report. This has been the lowest GDP growth rate recorded in Australia since September 2021.

ABS analysts wrote in the accompanying note that "GDP growth was weak in March, with the economy experiencing its lowest through-the-year growth since December 2020. GDP per capita fell for the fifth consecutive quarter, falling 0.4 per cent in March and 1.3 per cent through the year.”

EU GDP Q1 2024 Report

The eurozone’s GDP growth report for the first quarter of 2024 will be released by Eurostat on Friday. Economists expect the GDP growth rate to come in at 0.3% on a quarterly basis and 0.4% on a year-to-year basis, matching the Q4 2024 figures.

According to the latest Deutsche Bank World Outlook, the German bank increased the eurozone GDP outlook for this year from 0.4% to 0.9%. The bank's 2025 forecast for the eurozone remains the same at 1.5%. 

Regarding the eurozone’s inflation, the report says: "Our inflation outlook is broadly unchanged - sticky and with upside risks in 2024, converging to target in 2025 but the composition is a little less ECB friendly, with higher services and lower core goods inflation."

Test Your Trading Strategies on an Admirals Risk-Free Demo Account

Are you interested in practising trading without risking your funds? A demo trading account from Admirals allows you to do just that, whilst trading in realistic market conditions. Click the banner below to open a demo account today:

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.