Sterling continued to lose ground in early Europe on Thursday with markets unimpressed by the latest round of data. The GDP release intensified concerns over the outlook and risk of recession with the possibility that the UK economy will contract for several quarters as the increase in energy prices bites. In comments on Thursday, Bank of England Deputy Governor Ramsden stated that the bank had not gone far enough yet in terms of tightening monetary policy. He also considered that there are upside inflation risks over the medium term with stronger than expected pressures from rising wages. He did, however, consider that the rate hikes seen already were having an impact. The hawkish rhetoric had only limited impact with markets focusing on risk conditions. There were further concerns over Brexit developments with EU Commission Vice President Sefcovic stating that the EU is united in not re-negotiating the Northern Ireland Protocol. He also accused the UK of not meeting the EU halfway. Political rhetoric will be watched closely in the short term.
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ECB council member Makhlouf stated that the era of negative rates is reaching a conclusion. He added that the current level of inflation is concerning and it was realistic to expect rates will be in positive territory by early next year. The Euro was unable to derive support from the broadly hawkish comments from ECB officials. There was fresh unease over developments in the energy sector with Ukraine stating that it will not re-open the suspended gas transit route from Russia until Kyiv gains full control over the transit system.
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US producer prices increased 0.5% for April, in line with consensus forecasts, while the year-on-year rate declined slightly to 11.0% from 11.5% and slightly above market expectations. Core prices increased 0.4% on the month with the year-on-year increase at 8.8% from 9.6% previously and marginally below expectations of 8.9%. Initial jobless claims increased slightly to 203,000 from a revised 202,000 and above forecasts of 195,000 while continuing claims declined to 1.34mn from 1.39mn.
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14:00 Michigan Consumer Sentiment Index (May) Forecast 64 Previous 65.2