This is effectively a three-day business week in the US. And it’s summer (not officially just yet, but almost).

That’s a recipe for vacations, particularly on Wall Street, and were it not for the historic war raging in the Mideast, I’d expect somnolence from markets.

The marquee event ahead of Thursday’s US holiday and Friday’s empty data docket is obviously the June FOMC meeting. You can read the full preview here, but the bottom line is that the Committee may mark its inflation projections higher in the new SEP and could tip just one 2025 rate cut in the refreshed dot plot versus two in March. Such an outcome would risk the ire of an irritable Donald Trump who’ll anyway castigate the Fed for leaving rates on hold.

On the data front, the only top-tier release in the US is retail sales, due Tuesday. That release is expected to show a decline in nominal spending on goods, restaurant food and bar tabs for May, but it’ll be a false optic: As the figure below shows, the control group — i.e., the aggregate that’s relevant for current-quarter GDP tracking — will likely show a gain.

The drop on the headline measure, should it materialize, will be attributable to slower car sales and lower gas prices.

Needless to say, consumer sentiment’s still back-footed by the tariff drama, but the initial read on University of Michigan sentiment for June, released late last week, suggested the Trump administration’s truce with China bolstered household moods and tempered inflation expectations.

The figure below’s good. It’s from BMO’s Ian Lyngen and it plots Bloomberg’s US inflation surprise index (effectively the difference between forecasted outcomes and realized inflation) with the Michigan year-ahead series.

The juxtaposition between expectations and outcomes is pretty stark.

Recall that the 12-month Michigan metric soared to an eye-watering 7.3% in the preliminary read for May. It was revised lower to 6.6% in the final reading, and then dropped to “just” 5.1% in the preliminary read for June, the largest month-to-month drop in decades.

“Muted realized inflation data has defied tariff-related inflation fears,” Lyngen remarked, noting that the Bloomberg index receded to new “since 2020” lows following the CPI/PPI series for May. “While core inflation has trended surprisingly lower through the early stages of the trade war, there are many indicators that broad-based tariff pass-through to core goods prices is likely to materialize by early-fall, if not over the summer months,” he went on, sounding a word of caution.

Also on deck this week in the US ahead of the holiday: The first of this month’s housing numbers including builder sentiment (covering June) and starts/permits (for May). Jobless claims — which printed near 250,000 for a second week in the last update — will be released a day early, on Wednesday.

Overseas, the BoE and BoJ will keep rates on hold, the SNB may cut and China will release activity data covering May.