The dollar drifted lower in yesterday’s session as markets await today’s key US inflation report. Sterling was largely unchanged after UK employment data showed April’s payroll numbers fell larger than forecast, but wage growth remained stubbornly high. BoE member Huw Pill provided further hints that a rate cut could come as early as June as will. The euro made gains after the latest ZEW Economic Sentiment Index came in higher than expected, indicating the German economy is showing early signs of recovery.
Elsewhere tensions between the US and China increased after the US announced sharp tariff hikes on Chinese imported goods, including a hike on Electric Vehicles from 25% to 100%.
*Daily move - against G10 rates at 7:30am, 15.05.24
** Indicative rates - interbank rates at 7:30am, 15.05.24
We start the day with the first readings of Q1 GDP for Europe, expected to show growth up to 0.3%. A strong reading here could well lead to markets pricing in less rate cuts later on this year, which should be beneficial for the EUR. Focus then falls on the US with the release of CPI and then retail sales. Core CPI is expected to come in marginally lower in April and if so, then expect further weakness on USD, which has been sensitive to soft US data so far this month.
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