WSJ Timiraos: This month is good, but what will the impact of tariffs going forward

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Two headwinds that will make things look worse going forward.

A year ago tame PCE MoM data will fall off from the YoY calculation, putting upside pressure on the YoY levels.

  • May 2024, 0.0%
  • June 2024, 0.1%
  • July 2024, 0.2%
  • August 2024, 0.1%
  • September 2024, 0.2%
  • October 2024, 0.2%

3- month average: 0.1% 6-month average: 0.13%

For the core MoM over the next 6-months

  • May 2024, 0.1%
  • June 2024, 0.2%
  • July 2024, 0.2%
  • August 2024, 0.1%
  • September 2024, 0.3%
  • October 2024, 0.3%

3-month average of core PCE: 1.67%6-month average of core PCE: 0.2%

MoM gains of 0.2% or more for headline and core data will mathematically move the YoY up for the headline and the core measures.

This article was written by Greg Michalowski at www.forexlive.com.

ECB’s Panetta: Reduced room to cut rates further, but macro outlook remains weak

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  • Reduced room to cut rates further, but macro outlook remains weak and trade tensions could worsen it.
  • Future rate decisions need to be assessed on case by case basis, weighing data, inflation and growth outlook.
  • Essential to maintain pragmatic and flexible approach, closely monitor liquidity conditions.
  • Disinflation has not taken too high a toll on the Eurozone economy and is now close to completion.
  • Outcome of trade negotiations uncertain but impact on European economy bound to be significant.
  • Sectors most exposed to tariffs already showing signs of falling confidence, weaker expectations on orders and employment.

He’s a dove but he’s sounding more neutral here. The ECB is getting close to its estimated neutral rate, so they are now getting even more data-dependent for further rate reductions.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Spain May Flash CPI (HICP) Y/Y +1.9% vs +2.0% expected

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  • Prior +2.2%
  • CPI (HICP) M/M -0.1% vs +0.0% expected
  • Prior +0.6%
  • Core CPI Y/Y +2.1% vs +2.4% prior

Slight miss. This development is mainly due to the decrease in leisure and culture prices, compared with the rise in May 2024. Also influential, although to a lesser extent, was the fall in transport, which was greater than in May of last year, and the fact that the rise in electricity was lower than in the same month of the previous year.

There’s nothing here that will change the ECB plans.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Germany April retail sales -1.1% vs 0.2% m/m expected

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  • Prior -0.2% (revised to 0.9%)
  • Retail sales Y/Y 2.3% vs 1.8% expected
  • Prior 2.2% (revised to 3.3%)

German retail sales fell in May but we had some big positive revisions to the prior readings. Retail sales data is volatile so it’s generally a non market moving release. The data certainly won’t change anything for the ECB at this point.

This article was written by Giuseppe Dellamotta at www.forexlive.com.