Daily update
Daily update
- As expected, the ECB offered a 0.25-percentage-point rate cut, with general vagueness about the future. The rationale was also as expected—interest rates are following inflation lower. Applying the ECB’s logic to the likely path of the economy, another couple of rate cuts seem likely this year, but Lagarde was not prepared to signal that strongly at yesterday’s press conference.
- It is US employment report Friday. There are quite serious questions about the quality of this data—poor survey responses, poor assumptions about business creation, and a meaningful difference between the establishment and household surveys. Markets will react because that is the tradition.
- The expectation is for a boring report, with the key numbers essentially the same as last month. The range of forecasts is unusually tightly clustered, with only a couple of economists breaking away from the pack. Revisions are important, given the data quality problems.
- China’s May trade data showed stronger export and soft import growth. This is politically important with the US complaining about China’s “overcapacity” (meaning US households audaciously buy goods they want at prices they can afford). China’s exports to the US remain roughly 15% higher than US imports from China; unless a lot of ships are sinking in the mid-Pacific, that raises questions about data precision.
