It was a fairly quiet session with limited data and news releases.
The highlight of the session was the release of the Eurozone Flash CPI report for May. The headline inflation rate was in line with expectations and rose to 3.2% Y/Y from 3.0% in April. The increase was mainly driven by higher energy prices, while underlying inflation pressures also strengthened as core CPI rose to 2.5% y/y from 2.2% last month. The data reinforced expectations that the ECB is going to raise interest rates at its June meeting, but there was not much change in terms of overall 2026 pricing.
ECB policymaker Rehn confirmed that the interest rate increase at the June meeting should be seen as an “insurance” move to protect against future inflation risks, even if current inflation expectations remain well anchored. Describing the June rate hike as an “insurance hike” suggests policymakers are unlikely to make as many rate hikes in July as some analysts are suggesting without a strong signal from the data. It is likely that the ECB will introduce this move as an insurance and then wait until at least September to see how the data and the US-Iran situation develop over the summer.
In terms of US-Iran news, Iran is reportedly still reviewing and discussing the final text of the proposed agreement with the United States and has not yet submitted any official response to Washington. While talks appear to be moving forward, Tehran is demanding amendments and additional assurances before signing, underscoring that key details remain unresolved and the final deal may not be as close as previously expected. Trump said that the deal could be done next week but we have heard this many times before.
Despite the US-Iran standoff, optimism remains in the markets. The markets panicked for a moment yesterday when Tasnim reported that Iran would stop exchanging messages with the US in protest of Israeli attacks on Lebanon, but things returned to normal very quickly when Trump announced on Truth Social that there would be no troops going into Beirut, and that he had a very good conversation with Hezbollah, agreeing that all firing would stop.
In the US session, the only highlight is the US job openings data for April. Job openings are expected to be 6.880 million compared to 8.866 million earlier. The data won’t change anything for the Fed as US jobs data all along is pointing to a resilient/strong labor market. The market is projecting 15 basis points of Fed tightening by the end of the year, with a 47% chance of a rate hike in December.
