Made in America

June 01, 2026

Elias Haddad

US May ISM manufacturing index to support a more restrictive Fed.

ECB long-term inflation expectations remain well anchored.

China business activity not gaining much traction. CNH uptrend intact.

USD recovered some of Friday’s losses, crude oil prices rebounded slightly, and bond yields are firmer as investors pared back expectations of a swift US-Iran deal. Futures point to new all-time highs for US equities driven by the AI boom.

This week’s US jobs print will help determine whether the dollar index (DXY) remains anchored within its year-long 96.00-100.00 range or raise the likelihood of an upside break. Check out our Drivers for the Week Ahead for details.

The May ISM manufacturing index is up next (3:00pm London, 10:00am New York). The headline index is expected to improve 0.3ppt to 53.0 driven by a faster expansion in new orders and slower contraction in employment. The Prices Paid sub-index is seen rising 0.4ppt to 85.0, the highest since March 2022, and indicative of upside risk to inflation.

Overall, the US macro backdrop of a stabilizing labor market, sticky underlying inflation, and resilient economic activity back a more restrictive Fed. Fed funds futures continue to price in about 70% odds of a 25bps rate hike by year-end and a total of roughly 30bps of tightening in the next twelve months.

EUROZONE

EUR/USD is range-bound just under its 200-day moving average (1.1682). The ECB’s April CPI consumer survey showed longer-term inflation expectations were well anchored around the 2% target, reducing the risk the energy shock morphs into a broader inflation problem.

Median expectations for inflation over the next 12 months was unchanged at a multi-year high of 4.0%. But expectations for inflation 3 years ahead decreased to 2.9% from 3.0% while inflation expectations for 5 years ahead remained unchanged at 2.4%.

CHINA

USD/CNH is consolidating just above last week’s fresh multi-year low of around 6.7605. China’s May official PMI data suggests the economy is still stuck near stall speed. The modest gain in the non-manufacturing sector was partly offset by stagnant manufacturing activity. The details point to fragile demand as new orders and hiring remain weak.

Regardless, USD/CNH downtrend is intact in our view reflecting both China’s internal rebalancing story and CNH internationalization potential. The international usage of the yuan is very low compared to China’s shares of world GDP and world trade, implying a lot of potential for an increase in its usage.

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