Stickier inflation reflected in yesterday’s CPI data failed to move the needle on Fed expectations materially. The rate story explains the meek USD reaction to the data but we tend to think that when currencies that have been on a long bull run don’t react to bullish data, that bull run may be getting tired. If recession concerns do grow and transcend inflation fears, the USD should weaken broadly. St Louis Fed President Bullard last night reiterated that he favours raising the fed Funds target rate to 3.5% by year end but endorsed hiking 50bps at the next couple of meetings, per Powell’s post-FOMC comments. US PPI data might be less of a mover for markets this morning following the CPI report. We get weekly claims data at 8.30ET as well while there is a 30Y bond auction this afternoon (results 13.00ET).
Monthly Forecast For May: 4.2% Click here to learn more (14% real in May)
GBP - Industrial production and manufacturing output also weakened while construction activity jumped. The quarterly gain took growth back above the pre-pandemic peak for the first time but the cost of living crisis is clearly squeezing household consumption and curbing growth. BoE DG Ramsden repeated the BoE guidance that more rate hikes are likely in the months ahead to curb prices.
