- Global central banks continue to focus on inflation and the final reading for euro area inflation due later this week may be the data release needed to confirm the timing of the first interest rate cut from the ECB. Officials at the ECB would have been pleased to see services price inflation dropping in April to 3.7% after five stubborn months at 4% and Friday’s CPI inflation report may confirm that rate setters will be able to announce a cut at the 6 June policy meeting. The preliminary reading showed the headline rate at 2.4% in April, with the final reading expected to come in unchanged, putting the ECB on a path to cut rates significantly ahead of the US Federal Reserve.
- Inflation is again a common theme this week, with Wednesday’s April CPI report from the US likely to dominate markets in the coming days. A deceleration from March is expected, with headline CPI inflation expected to remain at 0.4%, with the year over year change ticking down at tad from 3.5% to 3.4%. Stubborn and sticky inflation remain a challenge for Chairman Powell and his FOMC colleagues so this week’s CPI and PPI (Tue) will be closely monitored along with the PCE data later in the month to see if there is any possibility of an earlier rate cut from the Fed.
- UK data is light this week, with tomorrow’s job data the only significant release on the docket. The labour market report is likely to deliver a mixed bag to markets and the BoE who left rates unchanged last week. Next week’s inflation report will be the next key piece of UK data as markets will look to see if a June rate cut is still on the cards.
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