There were no major UK data releases during Thursday as global developments tended to dominate. Prime Minster Johnson’s raft of policy proposals provided a slight element of support, although the overall impact was limited as underlying confidence in the UK outlook remained notably fragile, especially with further upward pressure on retail fuel prices. There were also underlying reservations over Brexit tensions and the risk of a trade war with the EU..
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The Euro edged higher into Thursday’s ECB policy decision with expectations of a hawkish stance. The ECB held interest rates at 0.0% at the meeting, in line with expectations, and also confirmed that bond buying under the APP programme would end. There was specific guidance for July with the council planning to increase rates by 25 basis points to 0.25%. It also plans to increase rates again in September with the size of the increase depending on the updated inflation outlook.
Bank President Lagarde stated that inflation pressures have broadened while wage growth has started to pick up and that the bank will make sure that inflation gets back on target over the medium term. She added that it was good practice to start with incremental rate increases, especially as it wants to wait for further evidence. There were, however, reports that some members wanted a commitment to a 50 basis-point hike in July.
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The dollar edged off a two-week high on the euro on Friday, ahead of inflation data that should guide the Federal Reserve’s policy tightening path, and after the European Central Bank said it would start its rate-hike campaign next month. U.S. core consumer price growth is expected to cool a fraction, data later in the global day is set to show. Such an outcome would provide some reassurance to those hoping decades-high inflation had peaked in March and that the April pullback was not a one-off.
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12:30 USD Consumer Price Index ex Food & Energy (MoM) (May) Forecast 0.5% Previous 0.6%
12:30 USD Consumer Price Index ex Food & Energy (YoY) (May) Forecast 5.9% Previous 6.2%