This week will likely get off to a slow start, with US closures across the asset classes due to the Memorial Day holiday, however European leaders will see no relief as they continue to combat the storm of the European crisis as the notion of a 'Grexit' continues to loom at the forefront of policy-makers' minds.
Following last week's lack of progress on any tangible European growth strategy, participants will be watching the wires carefully for any hints of development on the topic of Eurobonds, as the Austrian, Dutch and notably German representatives remain defiant against the proposals. Should any headway be made by leaders on a growth strategy, the topic of fiscal federalism will likely pop-up again, as contagion risks through the inextricable links between the European economies prevent the distinct national markets from building walls between one another. Further centralization of European governance could prove beneficial for the Euroarea, especially to the periphery, as the pressure on sovereigns could balance across the continent, lifting confidence towards the weaker members of the Eurozone, as the solid core of Germany and France provides a strut for the countries to lean on. Such reforms are very long-term in nature, but with German politicians, particularly finance minister Schaeuble, pressing for an elected European governor with political powers, such conversations should not be disregarded.
European solidarity will be further tested this week as Ireland are set to go to the polls in the referendum for the EU fiscal pact. Although the results will have limited impact on domestic policy, the outcome will be a strong indicator for the continued disillusionment and dissatisfaction of the populous towards Brussels. Leading Irish politicians have warned that a 'No' to the pact could severe ties between the country and the European Stability Mechanism, throwing the country's planned return to bond markets further into question. Should the referendum fail to provide approval for the EU's harmonization plans, yet more pressure will be placed on the shoulders of the austerity figureheads, notably Chancellor Merkel, giving further ammunition to the parties campaigning against the swift rate of spending cuts witnessed across the continent. With Ireland being the only country to put the reforms to the public vote, other European nations will be paying keen attention to the outcome as a gauge for their own government policy, so continental leaders will be watched closely for their reactions to the plebiscite.
Some major data releases are expected from the US this week, with the secondary reading of Q1 GDP and the crucial nonfarm payrolls due on Thursday and Friday respectively. Median forecast for GDP data is a downward revision from 2.2% to 1.9%, with slower than previously thought inventory accumulation weighing down on the reading. As for the nonfarms figure, current consensus stands at 150,000, with analysts noting the initial jobless claims figure remaining steady over the past four weeks, indicating for the unemployment rate to hold unchanged at 8.1%. From Europe, the final readings for May manufacturing PMI is due on Friday, which may catch some attention due to many of the recent readings coming in below forecast, weighing severely on European trade.
On the geopolitical front, Iranian nuclear concerns refuse to fade, as weekend reports show Tehran snubbing calls to decrease their rate of uranium stockpiling as well as failing to give inspector's access to suspected military sites. As such, energy markets will be looking towards representatives of the P5+1 for any comment on the upcoming wall of international sanctions as the global economic recovery remains sensitive towards any appreciation in the oil markets.