• MON: German Industrial Orders and Manufacturing Output (Apr); EZ Sentix Index (Jun
• TUE: Japanese GDP R (Q1); EZ Employment Final (Q1) and GDP R (Q1); Norges Bank Regional Network Report (Q2); German ZEW Survey (Jun) EIA STEO
• WED: BoC Policy Decision; Chinese Inflation (May); German Trade Balance (Apr)
• THU: ECB Policy Decision; US CPI (May); Norwegian CPI (May); OPEC MOMR; Iranian Nuclea
• FRI: UK GDP Estimate (Apr); University of Michigan Prelim Survey (Jun); CBR Policy Decision, IEA MOMR, G7 Meeting (1/3), US Treasury Financial Stability Council Meeting

NOTE: Previews are listed in day-order

MEXICO MID-TERMS (SUN): Mexico's mid-term elections are some of the most important in a very long time, and there are fears that it might usher in further populism. The entire lower house will be subject to elections (500 seats up for grabs), and all constituencies will have local and federal elections. It appears that the governing Morena party and is coalition partners will secure an absolute majority in the lower house, but will lose the two-thirds majority required to implement constitutional reform, which Pantheon Macroeconomics says will mean that the Morena party will lose its ability to implement key reforms. "Even if Morena wins two-thirds of the votes, though, it would need to have a majority at the state legislative level in order to change the Constitution," Pantheon writes, "it would be challenging for the party to win 17 states, the minimum required." (President AMLO will still have other tools to use to drive through constitutional reform, however). Pantheon argues that markets will "likely will come under severe pressure if Morena and its allies win a qualified majority in the federal Lower House, which will open the door to further populism, market-unfriendly policies, and interventionism," while "a win would give AMLO the legal ability to redistribute wealth, strengthen nationalist policies, and consolidate his power. Results could begin to be seen from around 02:00BST (Monday morning), or 21:00EDT on Sunday evening.

BOC POLICY DECISION (WED): The statement-only affair will see Canada's central bank keeping rates unchanged at 25bps, while its rate of QE purchases will likely be kept at CAD 3bln/week; it is also expected that it will maintain forward guidance that it will hold rates at current levels until slack is absorbed so that its 2% inflation target is achieved, which the central bank sees occurring in the second half of 2022. Canadian bank RBC notes that data in the interim has seen output in Q1 and early indications for Q2 somewhat below the MPR projection, though April inflation and RBC's own Q2 tracking estimates are higher. "More importantly, the impressive pace of vaccinations -- where more than two-thirds of those 12+ having at least one dose and attention now on second doses -- has helped push new cases to levels not seen since October," and the bank argues that now, the focus is on re-opening, which can give analysts more confidence that growth will accelerate in the second part of the year. RBC will also be looking out for hints on the timing of the BoC's next taper announcement, which RBC believes will be a CAD 1bln reduction in the weekly pace of purchases, to CAD 2bln. "The language from the April press conference noted less QE stimulus would be needed if the recovery evolves in line or stronger than their projection, which may be a tough hurdle for the July MPR," RBC writes, "If not then, we think a further taper can occur at the September meeting, with more data on the expected growth acceleration available by then." NOTE: Deputy Governor Lane will deliver the economic progress report on Thursday.

CHINESE INFLATION (WED): Chinese inflation data for May is scheduled next week where expectations are for headline CPI Y/Y to marginally increase to 1.0% vs prev. 0.9% growth in April and with PPI Y/Y expected at 6.5% vs prev. 6.8%. Consumer prices have been gradually increasing in the past three months and printed a seven-month high in April helped by the services sector and tourism demand, but was limited by food prices, and in particular a 21.4% Y/Y decline in pork prices as live hog production continued to pick up, while China’s NBS Deputy Director Sheng sees inflation significantly below the official target of 3% for the full-year. Conversely, the gauge for China’s factory gate prices is running hot and is expected to remain firm after the April reading registered the fastest pace of growth since October 2017. The increase in the Producer Price Index was driven by strong external demand and a surge in commodity-related prices such as petroleum and natural gas extraction, as well as smelting and the processing of metals. Looking ahead, recent views on the PPI have been mixed as Capital Economics anticipates much of the recent surge to be transitory, and for industrial metal prices to ease later this year, while Pantheon Macroeconomics expects PPI to continue increasing faster than implied due to base effects.

IRANIAN NUCLEAR TALKS (THU): Parties are poised to resume talks on June 10th for what would be the sixth round of negotiations. US sources, after the last round wrapped up, poured some cold water over the optimism expressed by the Iranian President – noting that "core differences remain on important questions and that real gaps on all three main areas -- nuclear, sanctions and above all sequencing -- still need to be closed.", as opposed to Rouhani's remarks that critical issues with the US have been resolved. “They have agreed to lift all major sanctions,” he said on the 20th of May, “including oil sanctions, petrochemical, shipping, insurance, Central bank, and other banks”. EU officials are cautiously optimistic that a deal could be announced at the next round of talks. However, heading into the Iranian elections on June 18th, some delegates have cautioned that a deal by then seems increasingly unlikely.

ECB POLICY ANNOUNCEMENT (THU): The upcoming meeting takes place against the backdrop of mounting price pressures in the Eurozone, regional reopenings and the EU being on track to reach its target of vaccinating 70% of its adult population by July. Despite some of the potentially hawkish impulses facing the ECB, the Governing Council remains fixated on financing conditions in the Eurozone. On that front, HSBC suggests that based on upstream and downstream indicators it will “be hard for the ECB to argue in June, as it did in April, that financial conditions haven’t tightened”. Tightening in of itself may not be viewed as an issue if it is deemed to be warranted based on economic activity. However, the risks surrounding the recovery and weak medium-term inflation outlook are likely to sway policymakers at the upcoming meeting. The main decision for the Governing Council (with rates set to be left unchanged) will be on the trajectory of its PEPP programme and whether to keep purchasing assets at a “significantly higher pace” during Q3. Rhetoric from policymakers has done little to indicate that a slowing down in the pace of purchases is on the cards and therefore leans towards the GC not wishing to undermine the recovery and instead potentially waiting until the September meeting to make such a decision (when the EU hopes to hit its vaccine target). That said, some desks have suggested that the word “significantly” could be dropped for the statement in a bid to appease the hawks. Questions remain over how the ECB will phase PEPP out and potentially bolster its APP programme next year, however, this will likely be more of a focus for future meetings. Elsewhere, during the press conference, the ECB might opt to upgrade its assessment of risks surrounding the economic outlook to a more balanced view (currently seen to be on the “downside” in the medium term), whilst acknowledging that the medium-term inflation outlook remains muted. From a more quantitative perspective, the accompanying economic projections are set to see a mild upgrade to the 2021 growth forecast of 4.0% as more upbeat expectations for Q2 and Q3 offset the mild disappointment seen in Q1. 2022 and 2023 are set to be left at 4.1% and 2.1% respectively. On the inflation front, consensus looks for an upgrade to 2021 and 2022 inflation forecasts of 1.5% and 1.2% respectively amid the backdrop of firmer oil prices and a more encouraging growth environment. The 2023 inflation forecast is set to remain at 1.4% and thus fall short of the ECB’s current inflation mandate of "below, but close to, 2% over the medium term".

US CPI (THU): Consensus looks for US CPI to rise 0.4% M/M in May, cooling from +0.8% M/M; Analysts at Credit Suisse feel that base effects will likely push the Y/Y headline rate to 3.5% from 3.0% in April. Core CPI is seen rising +0.5% M/M, cooling from 0.9% M/M in April. Vehicle prices rose aggressively in April, and are likely to continue doing so in May; categories sensitive to re-openings (hotels, air fares, car rentals, etc) will likely continue to benefit; seasonally adjusted gasoline prices may provide some offsetting influence. The market appears to have digested the Fed's message that the transitory burst of inflation in Q2 -- on pandemic base effects, commodities prices, and pent-up demand -- will likely fade towards the end of the year; if that does not transpire, officials have reminded us that they have tools to deal with the situation if needed. However, influential policymakers, like the former Treasury Secretary Larry Summers continue to warn on inflation, while others have argued that if the Fed is reading the situation incorrectly, it would mean that the hiking cycle might be steeper than would have otherwise been the case if price pressures were indeed benign. This debate, of course, will not be resolved with one months' worth of data, it is more of a theme to monitor as we enter H2 and towards the end of the year. The Fed itself has started the discussion on tapering, and any upside surprise would likely add pressure to hasten discussions.

UK GDP (FRI): Consensus looks for a further expansion in monthly UK GDP with the April print forecast at 2.3% vs. the 2.1% reading recorded in March. April 12th saw the second stage of the UK's reopening process with non-essential shops, gyms, hairdressers and outdoor dining returning. Previous monthly reports showed that the UK economy had adapted to lockdown conditions, however the reopening of certain sectors will have provided further momentum for growth. Available data has confirmed this thus far with RBC noting that high frequency indicators showed a swift pickup in activity whilst retail sales rose 9.2% M/M in April. From a policy perspective, this will have little sway on the BoE after its tweak to the pace of its Gilt purchases at the May meeting with policymakers now looking towards the final stage of reopening in June, which faces the risk of delay amid mounting COVID concerns. That said, many desks have suggested that any delays (presumed to be weeks, rather than months) would likely be immaterial to the UK's growth outlook.

CBR POLICY DECISION (FRI): After lifting rates by 50bps in April to 5.00%, and ahead of the CBR's June meeting, Governor Nabiullina has already stated that the central bank will consider either holding or raising its key rates at the meeting, and it was too early to speculate on the size of a possible rate hike, adding that the Board will definitely not be considering an option to lower rates. The Street is looking for a rate rise of at least 25bps (to 5.25%), as the central bank grapples with higher inflation (see rising to 4.8% by end-2021, up from the April forecasts which expected 4.5%). The market will be cognizant of April's meeting, where expectations were split between a 25bps hike and a 50bps hike; a Reuters poll of analysts see the central bank lifting rates to 5.50% in Q3, where it will likely be held through the end of the year (although analysts forecasts range from 5.25-6.0% by end-2021). The Governor was making the case the policy was too lose at the moment, and the central bank had already began moving towards neutral policy.