Yesterday's numbers from the US showed that there was a stagflationary backdrop even before Trump's announcements on the 2nd April.
The economy experienced a sharper-than-anticipated contraction of 0.3% in Q1, while the Core PCE index surged to 3.5%, surpassing forecasts during the same timeframe.
The stagflation concerns in the US saw markets divert their attention to the UK, driving GBP lower across the G10.
*Daily move - against G10 rates at 7:30am, 01.05.25
** Indicative rates - interbank rates at 7:30am, 01.05.25
A quiet day ahead, given there are global holidays in Asia and Europe today. However. it's worth noting that the Bank of Japan interest rate held this morning but downgraded inflation and growth projections, seeing markets write off the potential of any further rate hikes this year. As a result, the yen has weakened, and, we are seeing continued flows into the dollar.
As the day unfolds, keep an eye on the release of US manufacturing data, a crucial barometer for the nation's economic trajectory. This report will offer valuable insights into the early performance of the economy this quarter and shape expectations for the future.
On trade news there are reports that the EU is looking to share a paper with the US proposing lower trade and tariff-free barriers.
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