Euro area & US inflation data today
Weaker than expected US GDP data weighed on the dollar yesterday albeit trading ranges remained pretty tight. EURUSD rose to an intra-day high of almost $1.0850 before drifting lower again, and is trading at around $1.0820 this morning ahead of inflation data out of both the Euro area and US today. EURGBP is a little firmer at £0.8520, while the pound has given up some of yesterday’s gains against the dollar to trade back at $1.27.
Government bond yields fell on the back of the US GDP data, reversing some of Wednesday’s increase, with 10-year yields generally 5-6bps lower. In equity markets, European stocks had another reasonably positive session, adding around 0.5%, but US indices ended lower on the day.
The US economy grew a bit more slowly in the first quarter of this year than initially estimated, with GDP increasing by 0.3% q-o-q (revised down from 0.4%) having expanded by 0.8% in the final quarter of 2023. The growth in consumer spending eased in the first quarter albeit still solid at 0.5%, down from 0.8% in Q4’23.
Fed member Williams says he sees “some of the recent (US) inflation readings as representing mostly a reversal of the unusually low readings of the second half of last year, rather than a break in the overall downward direction of inflation”, and expects inflation “to resume moderating in the second half of this year.”
Data released earlier this morning showed inflation in France picked up in May, similar to the increases we have seen in Germany, Spain and Ireland, with the headline rate rising to 2.7% from 2.4% in April.
Regarding today’s inflation data, headline inflation in the Euro area is expected to have picked up to 2.5% this month according to the consensus forecast, from 2.4% in April, but the core rate is seen remaining at 2.7%. In the US meanwhile, headline PCE inflation – the Fed’s target measure – is seen holding steady at 2.7% in April, while core inflation is expected to have remained at 2.8%.
Other economic data due today include mortgage approvals in the UK and personal income & consumer spending in the US.