US inflation data today

The main exchange rates are treading water ahead of key CPI inflation data in the US later today. The euro is little changed against the dollar at around $1.0850 but is a touch lower against sterling at 85.6p, while the pound is marginally firmer against the dollar trading at $1.2680 this morning.

Equity markets were under pressure for most of yesterday’s session. European stocks shed more than 1%, though US indices rallied late in the day to end broadly flat overall. Sovereign bond yields fell back, reversing some of the increase that followed Friday’s stronger than expected jobs numbers in the US, with 10-year yields about 5bps lower.

Ahead of the ECB’s monetary policy meeting tomorrow, its latest bank lending survey reported a substantial decline in loan demand from firms (contrary to bank expectations of a recovery at the time of the previous survey a few months ago), and a small decline in demand for housing loans, as “higher interest rates exerted dampening pressure on loan demand”.

Fed member Bostic says because the “US economy has been so robust and so strong and so resilient,” he doesn’t “take off the table the possibility that rate cuts may even have to move further out.”

Today’s CPI report in the US is expected to show headline and core consumer prices both increased by 0.3% m-o-m in March, according to the consensus forecast, after both rose by 0.4% in February. This would see the annual rate of headline inflation increase to 3.4% from 3.2% in February but the core inflation rate ease a little further to 3.7% from 3.8%. A “miss” in either direction relative to the consensus forecast could have a notable enough impact on markets.

The Fed publishes the minutes of its March meeting as well today, while the Bank of Canada announces its latest monetary policy decision with interest rates expected to be left unchanged at 5% for a sixth straight meeting.