It’s been a pretty calm session with limited data and news releases.
The main highlight of the session was the release of the Eurozone Flash CPI report for May. The headline inflation rate rose to 3.2% Y/Y, matching expectations and accelerating from 3.0% in April. The increase was driven mainly by higher energy prices, while underlying inflation pressures also strengthened as Core CPI Y/Y climbed to 2.5% from 2.2% in the prior month. The data reinforced expectations that the ECB is going to raise interest rates at its June meeting but didn’t change much in terms of total 2026 pricing.
ECB policymaker Rehn confirmed that an interest rate increase at the June meeting should be viewed as an “insurance” move to guard against future inflation risks, even if current inflation expectations remain well anchored. The characterization of a June rate move as an “insurance hike” indicates that policymakers are unlikely to deliver a back-to-back rate hike in July as some analysts have been suggesting without a strong signal from the data. The ECB is most likely to frame the move as an insurance and then wait at least until September to see how the data and the US-Iran situation evolves over the summer.
In terms of US-Iran news, Iran is reportedly still reviewing and discussing the final text of a proposed agreement with the United States and has not yet submitted an official response to Washington. While negotiations appear to be progressing, Tehran is seeking amendments and additional assurances before signing off, underscoring that significant details remain unresolved and that a final deal may not be as close as previously expected. Trump said that a deal could happen over the next week but we’ve heard this so many times before already.
In the markets, optimism continues to prevail despite the extended US-Iran stalemate. Markets freaked out for a moment yesterday when Tasnim reported that Iran would stop message exchange with the US in protest against Israeli strikes on Lebanon but things got back to normal very quickly once Trump announced on Truth Social that there would be no troops going to Beirut, and that he had a very good call with Hezbollah which agreed that all shooting will stop.
In the American session, the only highlight is the US Job Openings data for April. Job Openings are expected at 6.880M vs 8.866M prior. The data won’t change anything for the Fed as all the more timely US jobs data has been pointing to a resilient/strengthening labour market. The market is pricing 15 bps of tightening for the Fed by year-end, with 47% chance of a rate hike in December.
