Key US inflation data today
The euro and sterling both advanced against the dollar yesterday, despite slightly firmer than expected producer price inflation data in the US, though their gains were modest enough. They are trading at around $1.0830 and just shy of $1.26 respectively this morning, ahead of the key US CPI inflation report later today, which in turn leaves the euro-sterling cross still hovering just below 86p.
It was a mixed day in government bond markets. US yields nudged down again (10-year yields are now approaching 4.40%) but German yields edged higher, while UK yields treaded a path between the two. It was another quiet day in equity markets meanwhile, with US stocks chalking up small gains and European indices ending little changed.
The annual rate of producer price inflation in the US picked up for a third month running in April to reach 2.2%, having been running below 1% as recently as November. The underlying (or core) rate has been nudging up recently as well, coming in at 3.1% last month from 2.8% in March (and 2.5% back in November).
Fed Chair Powell says “it looks like it will take longer for us to become confident that inflation is coming down to 2% over time,” adding that “it’s probably a matter of just staying at (the current restrictive monetary policy) stance for longer.” The market is still pricing in a first full quarter-point reduction in interest rates for November.
The key economic data release today is the April CPI inflation report in the US. The consensus expects the annual rate of headline inflation to have eased a touch to 3.4% from 3.5% in March, while the core inflation rate is seen easing to 3.6% from 3.8%. On a month-on-month basis, headline and core prices are expected to have risen by 0.4% and 0.3% respectively in April (after both rose 0.4% in March).
Other data scheduled for today include retail sales for April in the US and first-quarter employment in the Euro area, while we also get a second estimate of Euro area GDP in Q1 (the flash estimate showed the economy rebounded in the first three months of the year, with GDP increasing by 0.3% after falling by 0.1% in Q4 2023).