Investors were reassured by a pair of economic data reports that could clear the path for the Federal Reserve to slash interest rates later this year. A Thursday morning report on jobless claims revealed some weakness in the labor market, while a separate reading on wholesale prices suggested that inflation was softening.

Interest-rate futures showed chances of three or more cuts this year at around 35% Thursday, up from about 29% Wednesday and 22% at the end of last week, according to CME Group.

In focus this morning is the University of Michigan’s preliminary consumer survey for June, due at 10 a.m. ET.

The previous reading showed Americans were gloomy about the economy, with the index near its lowest-ever level, and with consumers braced for a surge in inflation. However, sentiment picked up later in May, compared to an initial readout earlier in the month, after the U.S. announced its trade truce with China. That pact was restored this week after further tensions.

Meantime, House Republicans narrowly passed a $9.4 billion rescissions package that includes cuts to foreign aid and public broadcasting. The package now heads to the Senate, where it could face further scrutiny.

And oil prices surged after Israel attacked Iranian nuclear sites and military leaders, and Tehran retaliated with drone strikes.

President Trump’s tariffs present the Federal Reserve with two conflicting challenges. First, they raise prices, which weakens the case for cutting interest rates. Second, they sap confidence and demand, which strengthens the case.

To date, the Fed has focused on the first risk, keeping its interest rate target between 4.25% and 4.5% since December. It might soon have to pivot to the second. Evidence is accumulating that inflation, despite tariffs, has been milder than feared, while the labor market might be deteriorating.

The Fed doesn’t have to act when it meets next week. There is less urgency than last September when rates were a full percentage point higher and rising unemployment carried a whiff of recession. Tariff effects might become more pronounced in coming months.

But in their outlook and rhetoric, Fed officials need to acknowledge risks are shifting. And they can also pat themselves on the back, because the economy is actually unfolding much as they expected when they began easing nine months ago.

• Rate-Cut Optimism Buoys Wall Street

The dollar sank to its weakest level in years, losing ground against the euro, Japanese yen and other currencies. The WSJ Dollar Index traded as low as 94.48, the lowest intraday level since July 2023, according to Dow Jones Market Data.

Americans filed new claims for unemployment benefits at the same rate last week as the week before, the Labor Department said Thursday, underscoring a recent trend of rising layoffs. Jobless claims filings totaled 248,000 in the week through June 7, unchanged from the previous week's revised level.

At a two-day meeting ending Tuesday, the Bank of Japan is widely expected to maintain its policy rate at 0.5%, the level it has been at since the last hike in January, before trade frictions deepened. The BOJ's policy board is also set to review a reduction in its government bond purchases, with what it is planning after April 2026 under close scrutiny due to a recent rise in yields of super-long bonds. BOJ policymakers are expected to examine the effects of the central bank's reduction in Japanese government bond purchases and discuss further plans. The central bank is cutting its JGB buying by 400 billion yen per quarter until March 2026.  (Dow Jones Newswires)

10 a.m.: University of Michigan Survey of Consumers, preliminary

8:30 a.m.: Empire State Manufacturing Survey
10 a.m.: Online Help Wanted Index

U.S. inflation seems to be moving toward the Fed's 2% target, while labor data points to a potential increase in unemployment. May PPI was a mild 0.1% while jobless claims remained hot, at 248,000. The combination bolsters expectations that an interest rate cut could come by early fall. On the CME's FedWatch tool, odds of a September cut are 61%, up from 58% yesterday. The central bank is expected to remain on hold next week and in July. Odds of two or more cuts by December total 78%, up from 70% yesterday. The two-year Treasury yield, which is very sensitive to Fed moves, fell on the data. It is at 3.891%. —Paulo Trevisani

• Canadian Prime Minister Mark Carney says a bilateral meeting with President Trump on the sidelines of the upcoming Group of Seven leaders’ summit in Alberta will determine how close the two sides are on a bilateral deal over tariffs.
• The euro's international role "remains strong and could be strengthened further," European Central Bank executive board member Isabel Schnabel said. A strong euro and "overperforming" European equity markets reflect a "new European growth narrative" while interest-rate cuts could be nearing an end, she said in slides accompanying a speech Thursday. (Dow Jones Newswires)
• Europe’s exports to the U.S. plunged by a third in April as demand was squeezed by President Trump’s tariff increases, leading to a fall in factory output that suggests economic growth has slowed after a strong start to the year.
• China’s plan to get consumers spending again may be working a little too well. Policymakers’ rollout of subsidies for smartphones, home appliances, cars and a host of other products have spurred a long sought-after pickup in spending. But the funds needed to keep it going are running out faster than planned.
• Oil futures gained more than $4 a barrel on Friday after Israel launched a wide-ranging attack against Iran’s nuclear facilities and military leadership, stoking fears of a regional conflict that could disrupt global energy flows.

Auto-parts supplier Marelli became one of the first big companies to file for bankruptcy under the weight of the Trump administration’s tariffs.

Retailers are raising the bar for free delivery—or eliminating the perk—as they seek to mitigate tariff costs.

Recent changes to CPA licensing laws in many U.S. states mean one thing for some prospective accountants: School’s out early.

Nvidia has unveiled a new generative foundation model that it says enables simulations of Earth’s climate with unprecedented resolution. The question is what else humans will do with it.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by news associate Roshan Fernandez in New York. Send your tips, suggestions and feedback to roshan.fernandez@wsj.com.