Overview: In a week packed with major economic events, labor market data and news on trade with Mexico had the greatest impact. The effects were offsetting, however, and mortgage rates ended with little change.

The key monthly Employment Report released on Friday fell short of the expected levels. The economy added just 75,000 jobs in May, which was well short of the consensus forecast of 180,000. In addition, downward revisions subtracted 75,000 jobs from the results for prior months. Average hourly earnings, an indicator of wage growth, also missed the mark. They were 3.1% higher than a year ago, down from an annual rate of increase of 3.2% last month. Since weaker economic growth reduces the outlook for future inflation, this report was positive for mortgage rates.

This week, most of the news about the trade negotiations involved Mexico rather than China. Following the recent threat by the Trump administration to impose a 5% tariff on all imports from Mexico beginning June 10, trade officials announced over the weekend that a deal had been reached and the proposed tariffs would be suspended indefinitely. This was positive for the stock market and negative for mortgage rates.

At Thursday's meeting, the European Central Bank (ECB) modestly changed its tone to favor looser monetary policy. To help stimulate economic activity, the ECB said it will hold rates at the current record low levels "at least through the first half of 2020," a shift from its prior declaration of "at least until the end of 2019." The outlook provided by the ECB for economic growth in the region is just 1.2% this year and 1.4% in 2020. In the U.S., the forecast is for growth rates above 2.0% during that time frame.

Week Ahead

Looking ahead, the U.S. Census Bureau will release the Retail Sales report on Friday, June 14. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. The Bureau will release the New Residential Construction report (also known as Housing Starts) on Tuesday. The next Federal Reserve meeting will be on Wednesday, June 19. No change in rates is expected, but investors will be looking for signals that a rate cut may occur later this year. In addition, news about the trade negotiations could influence mortgage rates.