Eurozone and U.S. Inflation in Focus This Week
GBP
GBP/USD is presently trading at 1.2530 (interbank), while GBP/EUR is at 1.1630 (interbank).
Last week, the Bank of England (BoE) maintained interest rates at 5.25% on Thursday. Additionally, Huw Pill, Chief Economist at the BoE, expressed dovish sentiments, aligning with the majority view of the BoE's Monetary Policy Committee (MPC).
The Pound received a boost from higher-than-expected UK Gross Domestic Product (GDP) figures released on Friday. The UK economy expanded by 0.6% in Q1, surpassing forecasts and signaling the end of the nation's brief recession. This economic rebound represented the most robust growth seen in over two years.
This week, markets will closely monitor the latest UK employment data scheduled for tomorrow, with expectations of an increase in the Claimant Count Change, reflecting more individuals claiming jobless benefits in April.
Additionally, the ILO Unemployment Rate is expected to rise further to 4.3% in March.
No significant events are scheduled for today
EUR
EUR/USD is stable, currently trading at 1.0775 (interbank).
Last month, ECB policymakers indicated the likelihood of interest rate cuts in June as Eurozone inflation is expected to ease back to 2% next year, according to the account of their April meeting.
Markets anticipate the ECB to cut its interest rate on June 6, although the rate path beyond that remains uncertain.
The European Commission is poised to release its second economic forecast on Monday, having previously downgraded its 2024 growth outlook in February to 0.9% for the EU and 0.8% for the euro area. Expected inflation is projected to ease to 2.7% in 2024 and 2.2% in 2025.
Additionally, the eurozone's second estimate of first-quarter GDP is due on Wednesday, and the final CPI for April, set for release on Friday, is expected to confirm the easing of inflation to 2.4% and core inflation to 2.7%.
Today’s Events (GMT):
10:00 - EU Economic Forecasts
USD
The dollar index, which measures the currency against a basket of other major currencies, remains steady at 105.31.
Moreover, the benchmark 10-year US Treasury bond yield maintains stability near 4.5%.
Last week, mixed U.S. economic readings led to uncertainty over the timing of interest rate cuts by the central bank this year, resulting in volatile swings in the dollar.
This week, focus will be on the final reading of the US Consumer Price Index (CPI) due on Wednesday, expected to show a 3.4% increase over the year in April, compared to a 3.5% rise in March.
Fed officials have indicated they are waiting for evidence of a downward trajectory in inflation before considering cutting the fed funds rate from the 23-year high.
Today’s Events (GMT):
14:00 - FOMC Member Mester Speaks
16:00 - NY Fed 1-Year Consumer Inflation Expectations: Forecast: 3.00%
CAD
USD/CAD is presently trading at 1.3677 (interbank) in today’s trading session.
On Friday, the Canadian economy added 90,000 jobs in April, the strongest increase in 15 months, surpassing the estimate of 20,000 gains, according to Statistics Canada. Additionally, the Unemployment Rate remained steady at 6.1% in April.
The resilient labor market gives the Bank of Canada (BoC) more time to ensure inflation remains sustained.
Oil prices have dipped slightly, with Brent crude futures sliding 0.1% to $82.72 a barrel, and U.S. West Texas Intermediate crude (WTI) at $78.21 a barrel, down 5 cents.
Data is light from Canada this week, with Wholesale and Housing data due on Tuesday and Wednesday, respectively.
No significant events are scheduled for today
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