Yada, Yada, Yada

June 02, 2026

Elias Haddad

Political jawboning tied to the Iran war continues to whipsaw markets.

US JOLTS take the data spotlight.

International role of the euro grew moderately in 2025, but it remains firmly in the dollar’s shadow.

USD, crude oil prices, and global bond yields pared back most of yesterday’s upswing. Political jawboning tied to the Iran war continues to whipsaw markets. Yesterday, the semi-official Tasmin news agency reported the Iranian negotiating team will suspend “talks and the exchange of documents through mediators.”

President Donald Trump struck a more reassuring tone noting that talks with Iran were continuing “at a rapid pace” while adding a memorandum of understanding with Iran to reopen the Strait of Hormuz could happen “over the next week.”

The April Job Openings and Labor Turnover Survey (JOLTS) is up next (3:00pm London, 10:00am New York). In March, the JOLTS report showed the hiring rate rose to a two-year high while layoffs continued to be low and stable. If sustained, this trend would significantly ease downside risks to the US labor market.

The May ISM manufacturing index released yesterday supports a more restrictive Fed policy stance and firmer USD. The headline index improved more than expected to a four-year high at 54.0 vs. 52.7 in April driven by a faster expansion in new orders and slower contraction in employment. The Prices Paid sub-index unexpectedly dipped to a two-month low at 82.1 vs. 84.6 in April but is still indicative of upside risk to inflation.

EUROZONE

Eurozone May CPI was mixed, EUR reaction muted. Headline CPI matched consensus at 3.2% y/y vs. 3.0% in April and tracked closer to the ECB’s Q2 baseline forecast (3.1%) than to its adverse (3.6%) and severe (4.1%) scenarios.

However, core CPI ran hot at 2.5% y/y (consensus: 2.4%) vs. 2.2% in April and tracked closer to the ECB’s Q2 severe scenario (2.4%) than to its baseline forecast (2.2%) and adverse scenario (2.3%). Worrisomely, services CPI surged to a seven-month high at 3.5% y/y, raising the risk of a persist pickup in inflation.

The swaps curve has virtually fully priced in a 25bps ECB rate hike to 2.25% at the next June 11 meeting. Rate hikes in a sluggish growth, high inflation environment, is not bullish for EUR but should help cushion the downside. We expect EUR/USD to carve out a bottom around 1.1400, reflecting a stronger US growth outlook relative to the Eurozone.

The ECB published today its yearly report on the international role of the euro. Based on a broad range of indicators, the international role of the euro grew moderately in 2025, but it remains firmly in the dollar’s shadow.

The composite index of the international role of the euro, an average of the share of the euro across eight indicators, increased by 0.2ppt at constant exchange rates in 2025. The euro’s largest gain came from its growing role in international debt issuance, which reached record highs during the year. The biggest setback for the euro came in global FX trading while other indicators highlight stability in the euro’s international role.

The ECB stressed there is an opening for the euro to enhance its global appeal. However, the Eurozone still lacks supply of highly rated assets and has made little progress towards a capital markets union for the euro to evolve into a truly global international currency.

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