Trump’s attempt to woo Powell fall flat

European markets are pushing higher as they look to close out the week on a positive tone. That comes despite a downbeat Asian session with a higher-than-expected Tokyo core CPI metric sparking Yen strength and Nikkei weakness. Economic data out of Europe has entered largely around regional inflation and German retail sales. Unfortunately, the resurgence in German consumer activity fell flat in April, with month-on-month retail sales falling 1.1% after an upwardly revised 0.9% increase for March. This marked the first decline in retail sales in four months, with both non-food (-1.3%) and food sales (-0.1%) moving lower. On the inflation front, we saw lower than expected readings for both Spain and regional German figures. With Spain CPI falling to 0% for the month, and all regions of Germany seeing weaker than expected monthly inflation, we are seeing initial signs that the eurozone figures will similarly decline ahead of next week’s likely ECB rate cut.

US equity markets are looking set for a less optimistic start to the day today coming off the back of yesterday’s meeting between Donald Trump and Jerome Powell. Unsurprisingly Powell remains unmoved by the president’s overtures, and markets remain steadfast in the opinion that the Fed will only consider easing rates once the reciprocal tariffs either come back into play or removed entirely in July. With the courts trying to stifle Trump’s tariff plans, the subsequent reversal of that judgement from the appeals court does highlight a potential situation where trade partners are less forthcoming until we get clarity over the legitimacy of Trump’s policies.

Looking ahead traders will be keeping a close eye out on the latest US core PCE price index release, with the federal reserves favoured inflation metric bringing a fresh insight into price pressures in the week of Trump’s tariff policies. Coming off the back of last month 0% monthly metric market, expectations for 0.2% figure highlight the potential inflation is under control for the time being. Thus, with unemployment remaining at 4.2% and the core PCE inflation figure anticipated at 2.6% the conditions are clearly there for the federal reserve to cut once greater clarity and stability over trade policy take shape.