What are the main events for today?
EUROPEAN SESSION
In the European session, the only highlight is the German ZEW index. The data is expected to show the third contraction in a row due to the situation in the Middle East and the Strait of Hormuz closure. The market-reaction will likely be muted given that it won’t change anything for the ECB.
AMERICAN SESSION
In the American session, we get the US CPI report. Headline CPI Y/Y is expected at 3.7% vs 3.3% prior, while Core CPI Y/Y is seen at 2.7% vs 2.6% prior. Elevated energy prices have pushed headline inflation back above the 3.0% mark. Inflation was elevated before the war started though and this latest shock just added more upside risk.
The annual Core PCE rate has been sticky near the 3.0% level since 2024 and recently rose to the highest level since December 2023. Also, let’s not forget that the Fed has been missing its 2% target since 2021. Fed’s Hammack recently said that there are concerns among businesses that an inflationary mindset is starting to become entrenched in people’s minds.
In the markets, it’s been kind of consensus that the Fed has abandoned the 2% target and now focuses more on keeping it in a 2-3% range like the RBA.
With such expectations it could be very hard to get inflation sustainably back to the 2% target without a more significant slowdown in the economy. The problem is that the Fed has been focusing more on the labour market and the soft landing, which had the side-effect of indirect financial easing through stock markets.
CENTRAL BANK SPEAKERS
- 10:00 GMT/06:00 ET – ECB’s Dolenc (neutral – voter)
- 17:00 GMT/13:00 ET – Fed’s Goolsbee (neutral – non voter)
This article was written by Giuseppe Dellamotta at investinglive.com.