European FX Outlook: The Eurozone inflation is set to pick up in May on oil prices

What you need to know before markets open

• The US State Secretary Mike Pompeo and high-ranking North Korean official Kim Yong Chol discuss nuclear weapons disagreements for second day in New York before the historic summit between their two leaders.
• Italian political parties renewed efforts to form a coalition government rather than force country to vote for the second time this year, easing the pressure off Euro.
• The US President Trump plans to announce as soon as Thursday the imposition of tariffs on steel and aluminum imports from Canada, Mexico, and the European Union.
• The Eurozone inflation is expected to pick up in May following the suit of Germany and France reporting earlier. For details of German inflation read my analysis here.
• The US core PCE, Federal Reserve’s preferred gauge of inflation is seen decelerating in April.
• Canadian quarterly GDP is expected to rise confirming the Bank of Canada optimism.

Thursday’s market moving events

• China’s state manufacturing PMI rose to 51.9 in May while services PMI increased to 54.9.
• Swiss Q1 GDP is expected to rise 0.5% Q/Q while increasing 2.3% y/y.
• The UK Nationwide house price index is expected to rise 3.0% y/y in May.
• French CPI is expected to rise 2.0% y/y in May. 
• Spanish Q1 GDP is forecast to increase 0.7% Q/Q and 2.9% y/y.
• The Eurozone inflation is expected to rise 1.6% y/y in May with core inflation accelerating to 1.0% y/y in May.
• The Eurozone unemployment is set to fall to 8.4% in April.
• Canadian Q1 GDP is expected to rise 1.8% quarterly annualized.
• The US core PCE price index is expected to decelerate to 1.8% y/y in April from 1.9% y/y in May.
• Chicago PMI is expected to rise to 58.0 in May.
• Federal Reserve Bank of Atlanta President Raphael Bostic is due to participate in a moderated discussion in Florida at 16:45 GMT.
• Federal Reserve Governor Lael Brainard is scheduled to speak about the economic outlook and monetary policy at the Forecaster's Club of New York Luncheon at 17:00 GMT.

Major market movers

• Euro rose more than 1% against the US Dollar on Wednesday as the Italian political turmoil eased with anti-establishment parties trying to form the government rather than have Italians vote once again this year.
• Canadian Dollar rocked on Wednesday rising more than 1% on the Bank of Canada hawkish interest rate outlook.
• Watch EUR for reaction to inflation and the unemployment data.
• Watch CAD to factor in the Q1 GDP data.

Wednesday’s macro summary

• The Bank of Japan Governor Haruhiko Kuroda opened the Bank of Japan-Institute for Monetary and Economic Studies annual conference in Tokyo with no remarks regarding the economy or monetary policy.
• The Reserve Bank of New Zealand Governor Philip Orr said during the parliamentary testimony in Wellington that the RBNZ is in a more solid place to deal with unexpected market events, but can't predict them.
• German import prices rose 0.6% over the month as well as over the year in April.
• German retail sales increased 1.2% m/m in real terms while increasing 2.3% y/y in real terms in April.
• French economy slowed down in the first quarter rising 0.2% Q/Q after revision.
• Spanish retail sales rose 0.5% m/m in April while falling 0.3% m/m in real, inflation-adjusted terms.
• Spanish harmonized inflation rose 2.1% over the year in April.
• German unemployment is expected to fall 10K while remaining unchanged at 5.3% in May.
• The Eurozone business climate ose to 1.45 in May.
• German harmonized CPI rose above expectations by 2.2% y/y in May up from 1.4% in April driven by energy costs.
• The US ADP private employment report is expected to add 178K new jobs in May. 
• The first revision of the first quarter US GDP rose 2.2% quarterly annualized rise. 
• The core personal consumption expenditures price index accelerated from 1.9% y/y originally estimated to 2.3% y/y. 
• The Bank of Canada kept the interest rate unchanges as expected.