Eurozone inflation and Fed speak amongst market movers today – Danske Bank

In view of analysts at Danske Bank, today's main event is the inflation print out of the euro area and suggest that in April, the 'Easter effect' pushed core inflation up by 0.5pp to 1.3% y/y but the May print will probably be a more reliable guide to the trend in actual underlying inflation pressures.

Key Quotes

“As the Easter boost to travel-related service prices wanes, we expect both headline and core inflation to drop back in May, to 1.6% and 1.1%, respectively. It leaves the ECB with a rather bleak picture of still too low core inflation and the expected recovery being threatened by trade war escalation and weaker Chinese growth. Market inflation expectations also keep falling and are back at the lows seen in 2016.”

“US Fed Chair Powell will speak this afternoon as part of the 'Fed listens' event. The theme will be monetary policy strategy, tools and communication practices. Although the speech may not entail guidance for new policy signals near term yet, the speech is important as part of the revisit of the monetary policy framework/target discussion. Watch out for interviews on the sidelines of the conference.”

“Focus continues to be on the US-China trade war, weakening macro data globally and the potential for central bank easing. US ISM manufacturing dropped further yesterday to 52.1, the lowest level in 2˝ years, adding to evidence that the US economy has joined the global slowdown with few engines left pulling.”