ADVANCED ECONOMIES
United States
The Fed is closer to tightening than to easing. Kevin Warsh has been officially appointed Chairman of the Fed by Donald Trump and unanimously elected Chairman of the FOMC by its members. He is expected to initiate a ‘change of regime’ regarding the measurement of inflation, communication (which will be less frequent), and the Fed’s balance sheet (which will be reduced in size). The FOMC minutes of 28-29 April confirm that the “overwhelming majority” of committee members recognise that the return of inflation to target has been delayed, while the labour market and economic growth appear to be on the right track. A “majority” of participants indicated that a tighter monetary policy “would become appropriate” if inflation remains above 2%. The Minutes indicate that the members in favour of abandoning the “dovish bias” (a view recently adopted by Governor Waller) outnumbered the two dissenting votes cast during the meeting. The market probability of at least one rate hike before the end of 2026 now stands at 80%. Long-term inflation expectations have risen to 3.9% (according to the University of Michigan). Coming up: PCE inflation and Q1 GDP (Thursday).
European Union
Trade agreements. The European Parliament and the Council have provisionally approved the trade agreement with the United States (without requiring prior compliance with US commitments), providing for the lifting of tariffs on the majority of US imports into the EU. The agreement’s sunset clause will come into force at the end of 2029. The agreement may be suspended if, by the end of 2026, the US has not lifted tariffs on steel. The European Parliament is scheduled to vote on the agreement between 15 and 18 June. Furthermore, the EU and Mexico have finalised a trade agreement and a comprehensive strategic partnership.
Eurozone
Stabilisation in confidence surveys, growth in intra-zone trade. Household confidence recovered to -19 in May (-20.6 in April). The composite PMI fell (-1.3 m/m to 47.5), partly due to one-off effects (see the comment on France), particularly in manufacturing (-0.8 m/m to 51.4), while the services PMI fell by 1.2 m/m to 46.4. The rise in input costs (+2.2 m/m to 70.5) is not being passed on to selling prices (+0.1 m/m to 56.9). The rise in negotiated wages slowed to 2.5% y/y in Q1 (3% in Q4). Exports (+2.2% m/m in March) are driven by intra-European trade. The European Commission (EC) has lowered its growth forecast to 0.9% in 2026 and 1.2% in 2027 (in line with the ECB’s baseline scenario). Inflation is expected to reach 3% in 2026 and 2.3% in 2027. Coming up: car registrations (Monday); EC survey (Tuesday).
Germany: Improvement in confidence surveys in May have partially reversed the pessimism seen in April. This is evident in the income prospects regarding household confidence (-29.8; +3.3 m/m) and expectations regarding the Ifo business climate (84.9; +0.7 m/m). The composite PMI stabilised in May (48.6; +0.2 m/m), driven by services (47.2; +0.3 m/m) and despite a deterioration in manufacturing (49.9; -1.5 m/m). The rise in input prices is accelerating, while the increase in selling prices is slowing down. The rise in producer prices (+1.7% y/y in April) remains confined to refined oil. Q1 growth is confirmed at 0.3% q/q, driven by exports and public demand, while household consumption stagnated and investment declined. China became the leading foreign investor in Germany in 2025, overtaking the United States. Coming up: inflation and unemployment (Friday).
Italy: Exports rose sharply in March, by 7.4% y/y, mainly to EU countries. Coming up: inflation and Q1 GDP (Friday).
France: A decline in services, robust performance in industry and construction. The INSEE business climate index stabilised at 94 in May (97 in March), while the composite PMI contracted to 43.5 in May (-4.1 m/m). Both indicators are in line for services (92.6; -1.7 m/m versus 42.9; -3.6 m/m), weighed down by the hotel industry and retail sector. However, they show a divergence in industry: +2 m/m to 102 for INSEE (bolstered by aerospace and intermediate goods); -3.9 m/m to 48.9 for the PMI (survey conducted later and affected by the reduction of two working days in May compared with May 2025). According to INSEE, activity is rebounding in construction (97, +1 m/m), following a 1.5% q/q decline in output in Q1. Sales of new homes rose in Q1 (including a 4% quarter-on-quarter increase for households). France remained the top destination for foreign investment in Europe in 2025 (AI, defence, energy, software, logistics) according to EY. Although the number of projects fell by 17%, employment levels remained stable. The government plans to increase fuel subsidies to EUR 1.2 billion, equivalent to 0.03% of GDP (an extension of sector-specific support and an increase in support for households). Coming up: household confidence (Wednesday); GDP, inflation and employment (Friday).
Japan
Strong growth in Q1, inflation moderated by government measures. GDP growth reached +0.4% q/q (+0.2pp) in Q1, driven by exports and household consumption. Export momentum continued in April (+14.4% y/y). In May, the composite PMI (51.1; -1.1 m/m), services PMI (50.0; -1 m/m) and manufacturing PMI (54.5; -0.6 m/m) all declined. Core inflation (excluding unprocessed food) fell to +1.4% y/y in April (-0.4pp), driven by energy costs (-3.9% y/y, -1.8pp m/m), while inflation in services excluding imputed rents (+1.2% y/y; -0.8pp m/m) is being moderated by favourable fiscal measures. Coming up: industrial production and consumer confidence (Friday).
United Kingdom
A slowdown in economic activity, employment and (temporarily) inflation. The composite PMI (48.5 in May; -4.1 m/m) is being dragged down by the services sector (47.9; -4.8 m/m). The manufacturing PMI remains stable at 53.7. Inflationary pressures on input and selling prices remain high. Household confidence rose to -23 in May (+2 m/m) according to GFK. The unemployment rate reached 5% in March (+0.1pp m/m), while employment recorded its sharpest fall in six years in April (-100,000). Wage growth, excluding bonuses, stood at 3.4% over three months (previously 3.6%). CPI inflation fell to 2.8% y/y in April (vs 3.3% in March); core inflation stood at 2.5% (vs 3.1%). The reduction in Ofgem’s regulated energy price cap has limited energy inflation. Producer prices rose by 4% y/y in April (+3% in March). Markets have pushed back their expectations for the BoE’s first rate hike to September (July according to our forecast). The UK has concluded a trade agreement with the Gulf Cooperation Council countries.
EMERGING ECONOMIES
Emerging market currencies after three months of war: Emerging markets have largely avoided widespread stress, although the currencies that have recorded the sharpest depreciation since the start of the conflict are predominantly Asian currencies (PHP: -5.8% against the USD between 27 February and 25 May; IDR: -5.3%; KRW: -4.8%; THB: -4.5%; INR: -4.4%), as well as the Egyptian pound (-8.4%) and the Romanian leu (-4.2% against the USD and -2.8% against the EUR). These countries are raising concerns among investors due to their vulnerability to the energy shock and/or deteriorating fiscal and external imbalances. The Indian and Korean central banks are considering further measures to support their currencies, while Indonesia has just raised its key interest rates.
Africa and the Middle East
South Africa: Inflation rebounded in April. It accelerated to 4% y/y, up from 3.1% in March, driven by transport (+4.9% y/y) and fuel (+11%), for which administered prices were adjusted in April to track international price movements. Inflation has now reached the upper limit of the central bank’s target range (3% ± 1%), which may prompt a potential increase in the key interest rate as early as next week.
Egypt: The Central Bank has left its key interest rates unchanged (20% for the overnight lending rate) against a backdrop of ongoing inflationary pressures (+14.9% y/y in April), an energy crisis and the depreciation of the pound.
Morocco: Successful capital markets debut. The government raised EUR 2.25 billion. The issue was divided into two tranches with maturities of 8 and 12 years. The favourable terms underscore the strength of the Kingdom’s macroeconomic fundamentals.
Kuwait and Qatar: Inflationary pressures remained contained in April despite rising food prices. Inflation is even slowing in Qatar, at 2.6% y/y, following a rebound to 4.6% in March. It stands at 2.6% y/y in Kuwait (compared with 2.1% in March).
Trade agreement between the GCC and the United Kingdom. The short-term economic impact for the Gulf states is expected to be minimal as the bulk of exports is already exempt from customs duties (hydrocarbons). However, this agreement carries significant political weight at a time when the region is facing multiple tensions (war in Iran, divergence between Saudi Arabia and the United Arab Emirates).
Asia
Indonesia: Interest rate hike. Despite moderate inflationary pressures (+2.4% y/y in April), key interest rates were raised by 50 basis points to support the rupiah, which has fallen to historically low levels against the dollar. Further measures are expected. The depreciation of the rupiah is attributable less to the energy bill than to a combination of financial and structural factors. Indonesia is dependent on foreign portfolio investment to finance its current account deficit and public financing needs. The growing risks of fiscal slippage (exacerbated by the energy subsidy policy) and issues related to governance under the Prabowo administration are two major sources of concern. The government’s recent decision to tighten its control over exports of raw materials (nickel, coal, palm oil) has further alarmed investors.
Vietnam: Trade balance in the red. Exports of goods remained robust in April (+22.2% y/y in value terms, following 18.6% in Q1 2026), driven by technology goods, yet imports rose more rapidly (+35.7% in April, following +27.2% in Q1) due to rising energy costs. The trade balance has slipped into deficit (-USD 7.5bn over the first four months of 2026, compared with +USD 4.3bn over the same period in 2025). The dong has depreciated by just 1.2% against the USD since 27 February, supported by central bank interventions and buoyed by sustained strong export and FDI prospects. Vietnam’s current account is expected to remain in surplus this year. However, foreign exchange reserves are quite limited to absorb the rise in hydrocarbon imports, and there is a significant risk of a rapid depreciation of the VND.
Emerging Europe
Türkiye: New financial tensions. On 21 May, an appeals court in Ankara overturned the results of the 2023 congress of the Republican People’s Party (CHP). This ruling invalidates the election of Özgür Özél as CHP leader and threatens to plunge the main opposition party into turmoil. This announcement prompted non-resident investors to sell off equities and bonds. So far, the impact on the exchange rate and the risk premium has been limited: the lira fell by 0.8% against the dollar, and the CDS spread did not widen beyond 245 basis points. However, this announcement is fuelling market jitters, which have been particularly pronounced since the central bank released its inflation report last week, revealing an upward revision to its inflation forecasts.
Latin America
Bolivia: Cabinet reshuffle on the horizon. After several weeks of heightened tension, President Rodrigo Paz, who has been in power since November 2025, has announced that a cabinet reshuffle is expected to take place in the coming days. In February, the World Bank announced its support for the new government’s economic stabilisation programme (including reform of the hydrocarbons sector to attract foreign investment). The economic situation has deteriorated significantly, with ongoing shortages of dollars and fuel, while rising inflation (14.2% y/y in April) is exacerbating social tensions surrounding the government’s reforms. In its April forecasts, the IMF highlighted that Bolivia was one of the region’s most fragile economies. It forecasts a 3.3% contraction in GDP and average inflation of around 21% in 2026.
Chile: GDP contraction in Q1. The economy contracted more sharply than expected (-0.5% y/y). The decline in investment and industrial activity outweighed the rise in public spending and the strength of private consumption. However, the central bank’s primary concerns continue to revolve around inflationary risks linked to the energy shock. Inflation reached 4.0% y/y in April, and it is likely that the key interest rate will remain unchanged at 4.5% at the meeting on 16 June.
COMMODITIES
On Monday, 18 May, the United States announced a 30-day extension related to the lifting of sanctions on Russian crude oil stored at sea (following the expiry of the previous extension on 17 May). This authorisation applies only to barrels of oil already loaded onto ships as of 17 April, and does not permit the loading of additional barrels. The impact on the market is expected to be limited. At the same time, the United Kingdom has also eased sanctions on imports of petroleum products (kerosene and diesel) from third countries, which are refined from Russian crude oil. These sanctions were introduced in October 2025 and are in addition to those targeting direct purchases of crude and refined oil imported from Russia, which remain in place.
Commercial stocks and strategic oil reserves in the United States continue to face significant pressure to sustain high levels of exports. The drawdown in the Strategic Petroleum Reserve reached an historically high rate for the second consecutive week, with a decline of 9.9 million barrels between the weeks of 8 May and 15 May (out of a total stock of 374 million).
The price of Brent fell below $100/b on the morning of 26 May ($99.3/b), down 11.5% compared with Monday, 18 May.
