Last week’s glut of European inflation figures raised the stakes for the European Central Bank (ECB), which is preparing to announce its latest interest rate decision on Thursday (6 June.)
All signs had pointed to it becoming the first major central bank to cut borrowing rates this year. However, the eurozone’s harmonised inflation rate climbed to 2.6% in May at the first read, above April’s 2.4% and higher than forecasts of 2.5%.
The one slight comfort for policymakers came from France, where May’s preliminary figures came in below expectations – 2.2% as opposed to 2.4%. Nonetheless, there was some suggestion on Friday that the figures could give the ECB pause. The odds are still just about tilted in favour of a cut, but that decision looks altogether more uncertain than it did a week ago.
It was a different story for the US on Friday, as personal spending and income metrics undershot expectations in April. Monthly core PCE price rises, frequently cited as the Federal Reserve’s favoured method of measuring inflation, meanwhile rose by 0.3%, matching market forecasts and the pace of the previous two months.
Over the course of last week, GBP/EUR fluctuated by around a cent but ultimately fell back from 21-month highs. GBP/USD also treaded water despite reaching a two-month high, while the euro advanced on the US dollar by around half a cent.
Here’s what to look out for this week…
Europe’s attention will be squared on Thursday’s interest rate decision, but before then we’ll get the final HCOB manufacturing PMI for May. Monday also brings US ISM Manufacturing PMI, which is expected to have climbed again in May.
JOLTs job openings from US are the main event on Tuesday, with ISM services PMI featuring mid-week.
Thursday is dominated by the ECB, before German balance of trade and US unemployment finish up proceedings.
Throughout all of that, we’ll be keeping our eyes trained on the various psychodramas playing out on either side of the Atlantic. The UK is getting into the swing of its election campaign, while Donald Trump’s legal woes are once again in the spotlight.
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