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Market Update

• Posted by currencies in EUR, Fed, Inflation, Rate Cuts, Sterling, UK, Uncategorised
• May 31, 2024
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Eurozone Consumer Confidence edged slightly higher for May’s reading yesterday, from -14.7 to -14.3. It was in line with expectations but more importantly reflected the smallest extent of pessimism by consumers since the start of Russia’s invasion in February 2022. This has been partly driven by inflation finally slowing, as well as growing expectations of an imminent interest rate cut by The European Central Bank next week.

This brings us nicely onto The Euro-Zone’s inflation release at the top of the hour. Inflation as we have seen across the board has been falling from their historic highs over the past few months, but this morning’s release is expected to show a slight uptick in prices. Mainly contributed by a rise in prices of items such as food, alcohol & tobacco, energy prices etc… On top of this, the released figures this morning will also have been impacted by the subsidised train tickets introduced in Germany last May as reported earlier this week. This shouldn’t be a cause for concern however, because Inflation in Europe as a whole is running at the lowest rate of any Western Economy, with the current level a whole percentage point lower than in The U.S, but more importantly only 0.4% off the actual target for The ECB. Taking this into consideration, it is highly unlikely today’s release will have any tangible impact on next week’s pending interest rate cut.

Keeping with Inflation, we have America’s May figures released this afternoon. It’s widely expected that prices will have risen by 2.8% year-on-year, crucially the same growth experienced back in March. Even taking food and energy prices into consideration, prices will have climbed by 2.7% which again is the same growth seen just 2 months previously. The Federal Reserve have their interest rate meeting in two weeks, and unlike The ECB, The Federal Reserve will be keeping a close eye on these figures as they weigh up whether or not to move forward with their first interest rate cut. As ever, any deviation from expected figures could well have an impact on USD currency pairs so will be worth watching.