Macroeconomics: The Week Ahead: 16-20 June 2025

The Week Ahead – Preview: 

The escalating conflict between Israel and Iran may render what is a busy week for data in the USA, China and the UK, major central bank policy meetings and a raft of other events somewhat irrelevant. But there will be a lot of focus on how the likely tense G7 leaders’ meeting reacts to the conflict, and also tries to find the time to discuss trade tensions, which will in turn offer indications of how rudderless the world has become in leadership terms. Oil markets face the challenging task of managing the risks of disruption to supply, which have thus far not materialized, against a backdrop of oversupply and weak demand, which will make for a very volatile trading environment. Against this backdrop the timing of France and Saudi Arabia hosting a summit this week at the UN on establishing a Palestinian state looks rather unfortunate, to say the least.

As for the Iran Israel conflict, some observations: a) Iran was once again caught by surprise, seemingly gambling (for want of a better word) that as long as the US nuclear talks were set to continue, Israel would not attack, even though it was aware the threat was genuine. b) As with Israel’s attacks on Hezbollah, it’s aim appears to be ‘decapitate’ Iran’s military and nuclear programme leadership, though this will be far more challenging given the depth of Iran’s ruling nomenklatura. c) If Netanyahu’s objective is to try and force ‘regime change’ in Iran, then any assumption that a new regime is likely to be more ‘friendly’ is likely to prove to be extraordinarily misguided, given that the IRGC is mostly likely to take over, and has been brutally effective in suppressing all forms of opposition to the current regime, and would thus likely be even more ‘hardline’. d) The governments of both countries are very unpopular, but as I noted in a Ghost In The Machine article on Iran some years ago , Iranians close ranks when they see any form of foreign interference, bear in mind the Persian Empire was established 2,500 years ago. e) Iran’s leadership does look weak, and effectively faces two choices, return to the negotiating table with the US and largely give up on its nuclear ambitions, which given Libya’s disarmament precedent in 2003 and the consequent descent into a still unresolved civil war in 2011 looks unlikely, or precipitate a wider regional conflict targeting the GCC countries and Iraq, taking the view (gamble?) that targeting these so called ‘soft targets’ (above all anything energy related) would force the US to make much greater efforts to restrain Israel. f) The GCC countries’ defences are not adequate to defend against the sort of missile attacks that Iran has launched on Israel, and this along with their clear desire to direct spending away from defence, and towards diversification away from dependency on oil and gas revenues has guided the rapprochement with Iran in recent years. g) China played a key role in that, above all in the relationship between Saudi Arabia and Iran. It can only be looking on in horror, and the more so given that Iran and Iraq have been the largest beneficiaries in financial terms of China’s Belt and Road initiative in recent years. h) While India is unlikely to intervene directly, very much a long-standing position and evident in its dissent against the weekend SCO statement condemning Israel’s attack on Iran, but there will be consequences in economic terms. It has benefitted from lower oil prices, and capitalized on the availability of discounts on Iranian and Russian oil, and aside from China ‘de-risking’ flows (above all services) has also been able to capitalize on closer economic ties with the GCC countries, as they diversify their economies. i) Given the rapid changing shifts in power and influence in the Middle East, a close eye will also need to be kept on Turkey, which was seen as gaining influence following the fall of the Assad government in Syria, and expressing strong support for US Iranian nuclear talks as “the only way” to resolve the tensions between Israel and Iran. Erdogan however stressed Turkey’s readiness “to do everything it can to prevent uncontrolled escalation of the tension” between Israel and Iran, though it is unclear what it could actually do. j) All of these developments are testament to an increasingly disorderly and chaotic G Zero world, as well as persistent headwinds to growth against a backdrop of constrained fiscal policy responses, due to already high levels of debt.

Statistically, there are US and China Retail Sales and Industrial Production, US Import Prices, housing and regional Fed surveys, China FAI and Property sector data, UK CPI, Retail Sales and PSNB, Japan National CPI, Orders and Trade, Australian Unemployment and New Zealand Q1 GDP. There are no less than 12 central bank policy meetings, including the Fed, BoJ, BoE, SNB, Riksbank and Norges Bank, while China has its monthly Loan Prime Rate fixings, and the BIS publishes its always insightful Quarterly Review. In the commodities space, the IEA and OPEC publish their monthly Oil Market Reports, the IEA also publishes its 2025 Oil Medium-term Outlook, France has monthly crop reports, and the US looks to the NOPA crush and USDA livestock monthly reports. A rash of commodity conferences includes Singapore Precious Metals, energy conferences in Australia, Japan and Malaysia, with Commodity Trading Week Americas and Marine Money Week taking place in the US. Govt bond supply is plentiful with auctions in the US, UK, Germany, France, Spain and Japan, while corporate earnings are sparse as is seasonally typical.

– China gets the week underway with its array of monthly activity and property sector data. Little change is seen for Industrial Production (6.0% y/y vs. prior 6.1% – any US trade truce impact is more likely to show up in June), FAI (4.0% y/y) and Retail Sales (4.9% vs. 5.1%). The latter should be supported by the Labour Day and Dragon Boat festival holidays and various subsidy programmes, though base effects will exercise some downward pressure. Property sector data are unlikely to show any material signs of improvement with Investment forecast to fall to -10.5% y/y from -10.3%, New & Used Home Prices likely to have remained negative, along with Property Sales (last -1.9% y/y) that continue to be flattered by base effects. China’s Loan Prime Rates are seen unchanged at 3.0% (1-yr) and 3.5% (5-yr) after last month’s 10 bps cut. The overriding impression of weak private consumption, overproduction in traditional industrial sectors such as steel making continuing to be offset to a large extent by the focus on high-tech and energy transition related sectors is unlikely to change, nor the continued vulnerability to drops in external demand.

– U.S.A.: Ahead of Wednesday’s FOMC meeting, Retail Sales are forecast to post a sharp -0.6% m/m drop thanks to the mean reversion fall in Auto Sales, though core measures (ex Autos & Gas and ‘Control Group) are seen up 0.3% m/m (vs. prior 0.2% and -0.1% respectively), but an outlier or often hefty revisions look to be a strong possibility, both given the muted though inconsistent goods price pressures seen in CPI, and perhaps some relief at the China ‘trade tariffs truce’. The underlying profile of private consumption will likely remain sluggish. Import Prices are forecast to drop -0.2% m/m, mostly thanks to energy prices, with the ex-Petroleum measure seen slowing to 0.1% m/m after rising 0.4% m/m in April. Industrial Production is seen unchanged for a second month, though Manufacturing Output is expected to eke out a marginal 0.1% m/m rebound after falling -0.4%, predicated on modestly better sector surveys and a rise in aggregate weekly hours. The week’s surveys are anticipated to show a slight bounce in the NAHB Housing Market Index to 36 from 34, but remaining weaker overall thanks to a myriad of uncertainties and continued upward pressure on building materials prices. The very erratic NY Fed Manufacturing index is seen edging up to -6.3 (from -9.2), while the more reliable Philadelphia Fed reading is forecast to improve to -1.0 from -4.0. The FOMC is expected to keep rates on hold at 4.25/4.50%, but the ‘dot plot’ may well see hawkish tweaks as some members shift to expecting just one rate cut, and a smaller number anticipate no rate cuts, which would sit uncomfortably with markets continuing to discount two rate cuts by year end. The statement and Powell’s press conference will likely dig in on the current ‘wait and see’ policy stance, with the Summary of Economic Projections likely evidencing a hawkish tilt, with sharp upward revision to 2025 core PCE deflator forecast to somewhere around 3.5% from March’s 2.8%, only partially mitigated by a modest 0.2 ppt upward revision to the Unemployment Rate forecast to 4.6%. The FOMC will likely emphasize that while GDP growth has slowed considerably, it nevertheless remains relatively solid, and per se allows the FOMC to maintain it’s ‘wait and see stance’. Of note will be comments about energy price risks, which given the 2021/2022 ‘team transitory’ debacle, may err to the side of being less willing to look through such risks, though probably emphasizing the concomitant headwinds to growth. Elsewhere the murder of a Minnesota state politician and the shooting of another along with the immigration related protests and deployment of the National Guard in California to quell the unrest underlines that social tensions and polarization continue to increase. This may only make the Senate negotiations on the passage of the tax and spending bill that much more complex, with the stated objective of passing the bill by July 4 Independence data looking increasingly elusive, per se elevating potential Debt Ceiling’ related risks.

– U.K.: The narrative around the UK economy has seen rather too many going down very unproductive ‘rabbit holes’, with Chancellor Reeves last week making the cardinal error of talking up Q1 GDP’s 0.6% q/q less than 48 hours before the -0.3% m/m fall in April monthly GDP was announced. Aside from the BoE meeting, April’s CPI is expected to post a modest 0.2% m/m 3.3% y/y rise, with an ONS correction to the calculation of the Vehicle Road Tax accounting for some of the fall, along with a drop in airfares, though there will be some offset from upward pressure on food and core Goods prices. But core inflation is expected to fall more significantly to 3.5%, paced by a reversal in Services CPI to 4.8% y/y from 5.4% (undoing all of April’s rise). Friday’s GfK Consumer Confidence is seen unchanged at -20, while the PSNB is expected to post a seasonally typical narrowing to £18.0 Bln, but likely to only raise more questions about whether the Labour govt will be able to meet its fiscal targets without further tax hikes and/or spending cuts. Last but not least in statistical terms, Retail Sales are forecast to drop -0.5% m/m headline and -0.7% ex-Auto Fuel, after jumping 1.2% and 1.3% m/m in April, with the sharper deceleration in the BRC and Barclaycard measures implying downside risks relative to the consensus. The BoE is expected to hold rates on Thursday, though Dhingra and Taylor are likely to stick with their votes for a 25 bps cut, above all given the sharp drop in last week’s HMRC Payrolls (-109K). The messaging on the rate outlook is likely to remain one of further ‘gradual and careful’ easing, per se implying cuts at the August and November meetings. Of particular note will be any comments on the increasing signs of easier wage inflation and a distinct loss of domestic growth momentum, as well as some potential risks from higher energy prices, though it may sound a slightly less pessimistic note on global growth prospects, above all due to the UK-US trade deal.

– Japan: The BoJ is expected to keep rates on hold at 0.50% when it concludes its policy meeting on Tuesday. The focus will be both on its rate guidance, which will emphasize the need to wait out on trade tariff negotiations and the Upper House elections in July, but still sees the need for further rate hikes in the not-too-distant future, as well as its QT plans. The consensus looks for the BoJ to slow its JGB purchase tapering to Y200 Bln per month in April 2026 from the current pace of Y400 Bln, though the bigger question for long-dated JGBs is the extent to which the Ministry of Finance adjusts its issuance plans (reducing long-dated volumes), after broadly rejecting the idea of buybacks. The week’s run of statistics are expected to be noisy, with Private Machinery Orders forecast to slide -9.5% m/m after surging 13.0% in March, while Exports are expected to contract -3.8% y/y (Apr +2.0%), with the drop in Imports seen accelerating to -5.8% vs. -2.2%. Friday’s National CPI will likely underline why the BoJ will maintain a hawkish bias, with headline easing 0.1 ppt to 3.5%, but ex-Fresh Food accelerating 0.1 ppt to 3.6% and core bumping up to 3.2% y/y from 3.0%. The latter would mean that core CPI has only registered one ‘below target’ reading in the past 30 months.

– Central banks: Switzerland’s SNB is seen cutting rates a further 25 bps back to 0.0%, above all due to the fall in CPI to -0.1% y/y and the continued strength of the CHF. It will leave the door open to redeploying negative rates and to FX intervention, but will note that it would still prefer not to have to use either. It will also likely suggest that the strength of Q1 GDP (0.8% q/q) was wholly due to front loading of exports, and the risks for the remainder of the year are to the downside, above all if the US imposes the proposed 25% tariffs. Sweden’s Riksbank is also expected to cut rates a further 25 bps to 2.0%, after holding at its last two meetings. It will point to the contraction in Q1 GDP, very sluggish domestic demand, well contained inflation and trade related uncertainties. It will likely signal that rates will be on hold going forward, but leave the door ajar to further rate cuts if needed. By contrast Norway’s Norges Bank is seen on hold at 4.50%, with growth expected to continue to hold up in Q2 and Q3, and underlying inflation easing but still high at 2.8%, though below the central bank’s expectation of 3.1%, while wage growth remains elevated at 4.5%. It’s updated rate trajectory will likely confirm expectations of 25 bps rate cuts in September and December, though there is some speculation that it may imply three rather than two rate cuts in 2026, predicated on a slowdown in investment and a return to target for inflation. Elsewhere Philippines’ BSP is seen cutting rates 25 bps to 5.25%, and signal further modest cuts ahead given that price pressures remain well contained. By contrast Bank Indonesia is expected to hold rates at 5.50%, unwilling to consider a back to back cut given the risk that it might trigger a setback for the IDR after its recent recovery. Turkey’s TCMB is likely to keep its 1-week repo rate on hold at 46.0%. But that offers a deceptive picture on rates, given that the central bank has been expanding lending via the overnight lending facility in order to align that effective funding rate (current 48.0%) back to the repo rate, after the March 19 TRY slide forced a rise of some 650 bps. Given that economic has clearly slowed, and labour demand is weak, TCMB will likely resume Repo Rate cuts in coming months, once it has realigned the two rates.

– There are 6 S&P 500 companies reporting this week, with worldwide corporate earnings highlights as compiled by Bloomberg News likely to include: Accenture, Darden Restaurants, Kroger and Lennar.