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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.

Author

Mario Blascak, PhD

Mario Blascak, PhD

Independent Analyst

Dr. Mário Blaščák worked in professional finance and banking for 15 years before moving to journalism. While working for Austrian and German banks, he specialized in covering markets and macroeconomics.

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