Yesterday was not a good day for the EU economy, with the PMI reports from various euro-area countries came negative. The composite Purchasing Manager’s Index dropped to an eighteen month low in May. According to the HIS Markit report, the hiring and buildups of work have showed slower increase rates, while companies are being less optimistic about the overall outlook of the economy. As per chief business economist at HIS Markit, Williamson, the previous months results were affected by the bad weather, illness or strikes, as well as the time that Easter was celebrated this year, the May report shows that the businesses were affected by a high number of public holidays, and there are hopes that the next months’ report will show a clearer picture of the overall growth.
The current situation of higher price for oil and rising wages that are increasing the cost for companies, with them being unable to accelerate the demand and pass the costs to end consumers, is not helping the economy to flourish. At this point the ECB officials are looking at the economic reports of the EU countries in order to be able to decide on the direction of the monetary policy.
Furthermore, the UK CPI came at a surprisingly low level of 2.4% in April, where the expected reading was at 2.5%. This is the lowest level since March 2017. The core CPI rose by 2.1% last month, whereas the forecast was 2.2%. The low level of inflation might decrease the pressure from the BoE to move ahead with the policy tightening and it is yet to see if there will be a rate hike in August.
It seems that the US inflation is nearing the Fed’s target and gradual rate hikes may commence, as per the FOMC meeting minutes yesterday. The CPI measured by the 12 month percentage change in the price index was 2% in March, justifying the need for further rate hikes and the majority of investors are now expecting a rate hike in June.
Traders will be closely monitoring the news coming from the UK, with Governor Carney’s speech that may provide some insights on the path of the monetary policy and interest rate hike. This will be followed by the ECB monetary policy meeting regarding the economic condition and the decision on where to set the interest rates. Later during the day, we will see the unemployment claims from the US and existing home sales.
ECONOMIC CALENDAR EVENTS FOR MAY 24th
GBP BOE Gov Carney Speaks
GBP Retail Sales m/m
EUR ECB Monetary Policy Meeting Accounts
USD FOMC Member Dudley Speaks
USD Unemployment Claims
USD Existing Home Sales