Seven Fundamentals for the Week: Fasten your seatbelts for the NFP, ECB and buzzing trade headlines

• Investors eagerly eye trade developments in the US and with its partners.
• The ECB is set to slash interest rates once again as inflation remains depressed.
• Nonfarm Payrolls are the climax of a busy week of top-tier US economic data points.

Sell in May and go away? For those who stay, there is plenty to trigger high volatility, from ongoing trade developments to the European Central Bank (ECB) decision and to Nonfarm Payrolls (NFP).

1) Doubts about future trade deals creep in

It has been two months since "Liberation Day," and the clock is ticking toward July 9, when US President Donald Trump's harder "reciprocal tariffs" are set to take effect. So far, only one trade deal was signed, with the UK – which was three years in the making and considered the easiest.

Skepticism also dominates in other areas. The recent ruling by the US International Court of Trade, which deemed most duties illegal and an overstep by the White House, surely shook countries' willingness to make concessions.

The levies remain in place while the decision makes its way through the legal system. Nevertheless, there is no reason for the EU to loosen regulations, or any other partner to cede ground, if Trump cannot necessarily follow through on his threats.

The biggest trade relationship is the Sino-American one. Both sides agreed to lower extreme tariffs of over 100%, but most Chinese imports still incur 30% levies. Moreover, Trump has recently raged against Beijing's alleged violation of those agreements, signed only three weeks ago.

If the US reaches an agreement with India – which is reported to be close – markets would rally. Any other deals would be good news. However, there is a higher chance of a fruitless grind.

2) ISM Manufacturing PMI may bounce on tariff relief hopes

Monday, 14:00 GMT. The Institute for Supply Management (ISM) publishes its Purchasing Managers' Index (PMI) for the industrial sector early in the week, serving as the first hint toward Friday's employment report. It will likely be upbeat.

Expectations for May stand at an improvement of April's 48.7 score. There are good reasons for optimism, namely the delay in the tariff policy. If the score exceeds 50, the threshold separating contraction and expansion, markets would cheer.

The Employment component is important for Friday's Nonfarm Payrolls, while the Price Paid gauge provides guidance of inflation expectations.

3) JOLTs have likely continued declining

Tuesday, 14:00 GMT. The JOLTS Job Openings report is a lagging indicator – data is for April, and not May, like the NFP. Nevertheless, the Federal Reserve (Fed) has a special place for it, giving it extra importance.

In recent months, JOLTS has been declining, falling to an annualized 7.19 million in March. That was the lowest in over four years. Another slide is expected, reflecting fewer jobs on offer as the economy gradually slows.

Within the report, the quit level is of interest – people voluntarily leave their jobs when they feel confident, and refrain from changes when they are worried.

4) ADP's effect is short-lived, but shapes NFP expectations

Wednesday, 12:15 GMT. Automated Data Processing (ADP) is America's largest payroll provider, the company behind roughly one in six pay slips in the country. Its private-sector jobs figures are not often well-correlated with the official NFP, but tend to trigger a knee-jerk reaction in markets.

Moreover, the release also shapes expectations for Friday's release. ADP's data came out at 62K in April, nearly half the expectations, and a bounce to above 100K is on the cards for May.

5) ISM Services PMI may extend gains after averting contraction

Wednesday, 14:00 GMT. Services is America's largest sector, and it would have been the world's third-largest economy had it been a country. ISM's forward-looking indicator for this sector surprised with a bounce to 51.6 points in April, showing the effects of the delay in reciprocal tariffs more than the angst about them.

The report for April may be even better, indicating businesses' optimism about the removal of punitive duties on Chinese goods. The latest court ruling against most levies probably came after the survey was closed.

The Employment component impacts NFP expectations, but the headline is of no less importance – ISM Services PMI is a top-tier indicator.

6) ECB seen as cutting interest rates for the seventh time in a row

Thursday, decision at 12:15 GMT, press conference at 12:45 GMT. Eurozone inflation has been hovering just above 2% YoY in recent months, both in the headline and core measures. That is good news for the European Central Bank, which had to confront price rises of over 10% YoY in late 2022.

Lower inflation and higher uncertainty about growth prospects allow the Frankfurt-based institution to cut interest rates by 25 basis points once again.

Investors will look to hints from ECB President Christine Lagarde about the central bank's next moves. Does massive defense spending imply higher inflation and a pause to rate cuts? Can borrowing costs further fall?

There are only several non-comforting certainties: that Lagarde will stress extreme levels of uncertainty and vow to make decisions on a meeting-by-meeting basis.

The Euro (EUR) will likely rise if Lagarde refrains from signaling any imminent cuts, but rather adopts a wait-and-see mode.

Apart from hints about further moves, investors will eye the ECB's updated growth and inflation forecasts, which will likely remain at low levels.

7) NFP may miss expectations for a change, weighing on sentiment

Friday, 12:30 GMT. America's Nonfarm Payrolls have not beaten expectations for three consecutive months since early last year. Will the current two-month beating streak end in a figure below estimates for May?

Contrary to the see-saw nature of beats and misses on NFP expectations, most revisions are to the downside. Estimates for the headline will change during the week, when leading indicators like ADP's jobs report come to light. However, there is a good reason to expect a downward revision for April numbers.

Did Trump's policies impact employment? There is no clear evidence. Elon Musk is out of his job at the Department of Government Efficiency (DOGE) after his efforts to slash spending and fire staff amounted to little.

Did tariffs cause layoffs? What about the role of Artificial Intelligence (AI) in creating or destroying positions? The NFP data for May could shed some light on recent trends. There is a good chance of slower net hiring, but not of net job losses.

Final thoughts

While the economic calendar is packed this week, it is essential to note that headlines related to trade could come at any hour, triggering unexpected price action. Trade with care.