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United States Redbook index (YoY): 1.4% (April 24) vs 0.8%

 

 

 

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USD under pressure ahead of FOMC – TDS

 

 

FXStreet (Edinburgh) - Strategists at TD Securities assessed the potential scenarios for the greenback in light of the FOMC statement due tomorrow.

 

Key Quotes

 

“The USD looks very delicately poised ahead of the FOMC meeting, which gets underway today”.

 

“This meeting is not “live” in a policy sense but the USD will take its cue from what the Fed’s statement implies about the outlook; a nod to the recent softness in the data would not be a great surprise but any hint of a delay in lift-off would still likely pressure the USD, given that broader market positioning is still heavily biased to USD longs”.

 

“On the other hand, a steady-as-she-goes message, indicating that the Fed is looking through the recent weakness in the data as a temporary phenomenon and which keeps the H2 lift-off timetable intact would be more of a surprise for investors”.

 

“At this point, the DXY looks poised to weaken further; the correction/ consolidation over the past 6-weeks or so leaves the index resting on (or just below) major support at 96.50 right now and the market is poised to close below the 40-day MA for a fourth consecutive session today (something not seen since July 2014); momentum traders are very likely paying close attention and it will not take much (in terms of further DXY weakness) to prompt a “pile on” short trade from this sector of the market and a broader about the USD’s near-term direction from the analyst community”. 

 

 

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GBP/USD extends gains on a weak US data

 

 

FXStreet (Mumbai) - The US saw fresh offers, thereby pushing the GBP/USD higher to a fresh session high of 1.5326 after the weaker-than-expected US consumer confidence and regional manufacturing data hit the wires. 

 

GBP/USD extends 700-pip rally

 

The cable extended the 700-pip rally witnessed from the low of 1.4564 after the US consumer confidence data for April missed the expectation of 102.5 to print at 95.2. The Richmond Fed manufacturing index fell to -3, beating the estimate of -2. 

 

Focus now shifts to the US FOMC policy statement due for release tomorrow. The recent string of a weaker-than-expected US data convinced investors that the Fed could delay the rate hike to late 2015 or early 2016. 

 

GBP/USD Technical Levels

 

The immediate resistance is located at 1.5344, above which the gains could be extended to 1.54. On the flip side, a break below 1.53 could push the pair down to 1.5228.  

 

 

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Japan risks a below consensus Q1 GDP print – BBH

 

 

FXStreet (Barcelona) - The Brown Brothers Harriman Team notes that the soft Japanese data indicates that Q1 GDP might print a sub-2% print.

 

Key Quotes

 

“March completes the 12-month period following the sales tax increase. Retail sales have fallen 13.0% over the past year. The 1.9% decline in March (consensus was for a 0.6% increase) follows a 0.7% rise in February after a 1.9% decline in January. The weakness in consumption in Q1 warns of softer overall growth. The consensus is for 2.2% growth in Q1 GDP. We see the risks for a sub-2% number when it is reported on May 19.” 

 

 

 

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Mexican peso could pick up pace in the near term – JP Morgan

 

 

FXStreet (Edinburgh) - The Mexican peso appears somewhat undervalued, according to analysts at JP Morgan, pointing to a recovery in the upcoming periods.

Key Quotes

 

“FX pass-through to inflation remains almost negligible, as has been the case in the last months, while activity disappointed consensus forecast, again”.

 

“Indeed, the low inflation prints together with soft economic activity momentum (our economic activity surprise indicator for Mexico remains in negative camp) have prompted a shift in the Banxico authorities, who have toned down their hawkish stance”.

 

“Therefore, and despite a more rangebound USD, the MXN has underperformed most Latin America peers month-to-date”.

 

“That said, in the short-term the MXN continues to look cheap to coincidental risk metrics, and soft US data suggests a likely correction from lows”.

 

“The relative cheapness the currency lingers, as our short-term valuation models continue to screen a cheap MXN in particular vis-à-vis the USD”. 

 

 

 

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Canadian dollar and crosses in a technical snapshot - TDS

 

 

FXStreet (Guatemala) - Analysts at TD Securities offered the Canadian dollar and crosses in a technical snapshot.

 

Key Quotes:

 

"USD/CAD retains a weak technical undertone; we continue to target a slide to the low 1.19s but overshoot risks are rising."

 

"EUR/CAD's bear trend remains intact from a broader perspective but may consolidate further near-term."

 

"AUD/CAD's pop higher keeps the cross in a choppy (directionless) range." 

 

"GBP/CAD remains potentially well-positioned to rebound from a test of key, medium-term support." 

 

"CAD/JPY is grinding out gains."

 

"NZD/CAD turns higher again but we think levels nearer 0.94 provide an entry point for shorts." 

 

 

 

 

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Germany Consumer Price Index (MoM) meets forecasts (-0.1%) in April

 

 

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NZD/USD might strengthen further before sellers appear – ElliottWave-Forecast

 

 

FXStreet (Barcelona) - Daud Bhatti of ElliottWave-Forecast, expects NZD/USD to find sellers around 0.7860-0.7937 levels.

 

Key Quotes

 

“Preferred Elliott Wave view suggests NZD/USD is doing a 7 swing (WXY) structure up from 4.1.2015 low. 3 waves up to 0.7740 completed wave “W” followed by a 3 wave pull back to 0.7534 which we think complete a FLAT in wave X. Afterwards, the pair continued the rally higher and completed wave ((w)) at 0.7740.”

 

“We are now expecting a pull back in wave ((x)) to correct the cycle from red X low (0.7534) in 3, 7 or 11 swings followed by another push higher toward 0.7860 – 0.7937 area before decline resumes. 50 – 61.8 fib area of wave ((w)) as of now lies between 0.7638 – 0.7613. Pivot at 0.7534 low should remain intact during proposed ((x)) wave pull back for us to see 1 more push higher as shown on the chart.”

 

“Once we have seen the next leg higher toward 0.7860 – 0.7937, we expect to see sellers in that area for 3 waves lower at minimum.”  

 

 

 

 

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USD/CAD targets 1.1800/50 in the near term – Westpac

 

 

FXStreet (Edinburgh) - The pair could extend its current downside to the area of 1.1800/50, suggested strategists at Westpac.

 

Key Quotes

 

“Likely a 1.20-1.25 trade until further notice, with a break back through 1.25+ at some point still favoured as Canada’s self-appointed cheerleader in chief - Poloz – finds that his optimism for a strong Q2 growth bounce back proves underwhelming”.

 

“For now he is reiterating that the Jan rate cut was "insurance" and there is no need for more. But he could be singing a different tune in coming months”.

 

“Recent close below the Feb/Apr range and particularly the parallel channel bottom at 1.2350/80 confirms that a material multi-week top is in place in USDCAD. Target 1.1800/50 trend support”. 

 

 

 

 

 

 

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EUR/GBP off highs post –German data

 

 

FXStreet (Edinburgh) - EUR/GBP is now returning to the 0.7160/55 band after the release of the German inflation figures.

 

EUR/GBP eyes on US data

 

The European cross is leaving session highs near 0.7170 after preliminary consumer prices in Germany matched consensus for the current month, rising 0.4% on a yearly basis and contracting 0.1% inter-month.

 

Data wise in the UK, Housing Prices tracked by Nationwide rose 1.0% on a monthly basis and 5.2% on a year to April, surpassing expectations; on a different tone, the Distributive Trades survey by CBI dropped to 12 from March to April, missing estimates at 25.

 

EUR/GBP key levels

 

As of writing the cross is up 0.04% at 0.7161 and a break above 0.7171 (high Apr.28) would open the door to 0.7206 (high Apr.22) and finally 0.7210 (high Apr.21). On the flip side, the next support aligns at 0.7118 (low Apr.23) ahead of 0.7102 (76.4% of 0.7015-0.7385) and then 0.7093 (low Mar.16). 

 

 

 

 

 

 

 

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German inflation to continue to increase – ING

 

 

FXStreet (Barcelona) - Carsten Brzeski of ING, reviews the German inflation data, noting that prices increased to 0.4% yoy, and will likely continue to climb higher.

 

Key Quotes

 

“Based on the results of six federal states, German prices dropped by 0.1% MoM in April, from 0.5% in March. On the year, prices increased by 0.4%, from 0.3% in March. The harmonized European measure of headline inflation, more relevant for ECB policy-making, increased to 0.3% YoY in April, from 0.1% in March.”

 

“Still low headline inflation, masks two diverging trends. Obviously, the base effects of lower energy prices are still keeping headline inflation low. At the same time, however, lower energy prices, combined with battles for market shares, are also pushing down prices in the other sectors. Particularly, the sectors with strong competition, both domestically and internationally.”

 

“On the other hand, however, headline inflation in the pure domestic, typically non-tradable, sectors is accelerating. Just think of the health care sector or tourism. Interestingly, even excluding volatile energy prices, increasing and dropping prices seem to net each other out, as core inflation has remained very stable over the last months.”

 

“Looking ahead, German headline inflation should gradually continue to increase. However, as long as even the largest and strongest Eurozone economy does not show any signs of inflationary over-heating, the ECB will continue QE and hush any tapering discussion.” 

 

 

 

 

 

 

 

 

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UK election betting odds show few positive signs for Labour – TDS

 

 

FXStreet (Barcelona) - The Research Team at TD Securities shares an update regarding the key developments in the betting markets related to UK elections.

 

Key Quotes

 

“Betting odds for the UK election have started to show a discernable gap between the odds of Ed Miliband becoming the next PM remaining around 60% while the odds for a Labour-led government have fallen to 50/50.”

 

“We similarly saw these government odds lead the PM polling two weeks ago when Miliband started to build a lead, which may suggest further shifts in favour of Conservatives as Labour has campaigned rather vocally recently over making no deal with SNP, and the odds of a minority Labour government have fallen.”

 

“As the constituency markets have started to deepen, we are also seeing more two-way shifts in the trends there between Labour and Conservative seats, but more of the marginal seats still seem to be leaning in favour of the Tories.”

 

“The marginal LibDem seats show little sign of momentum in favour of the coalition partner at this stage, while we have actually seen some shifts in favour of UKIP in betting markets which is at odds with much of the current polling where UKIP continues to see support drained off as they are seen as uncompetitive in races.” 

 

 

 

 

 

 

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USD/CAD pierced 1.2000 on US data

 

 

FXStreet (Edinburgh) - The greenback is rapidly losing the grip vs. its Canadian counterpart on Wednesday, dragging USD/CAD to fresh lows in sub-1.2000 levels.

 

USD/CAD now focuses on FOMC

 

The pair saw its downside accelerated after the US GDP figures disappointed market expectations, expanding at an annual pace of 0.2% during the first quarter vs. 1.0% previously forecasted. 

 

Spot quickly visited levels last traded in mid-January around 1.1990, although it has quickly returned above the 1.2000 handle. Next of relevance will be Pending Home Sales ahead of the key FOMC meeting.

 

USD/CAD significant levels

 

At the moment the pair is down 0.08% at 1.2022 with the next support at 1.1989 (low Apr.29) followed by 1.1985 (high Jan.19) and then 1.1940 (low Jan.20). On the other hand, a break above 1.2116 (high Apr.28) would open the door to 1.2205 (high Apr.27) and finally 1.2269 (high Apr.23). 

 

 

 

 

 

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AUD/USD could head towards 0.8250/0.8300 – Westpac

 

FXStreet (Edinburgh) - A continuation of the upbeat momentum in the pair could see it advancing to the 0.8250/0.8300 levels, noted strategists at Westpac.

 

Key Quotes

 

“AUD/USD has finally gained some traction from the steep bounce in iron ore prices, despite the less impressive rally in longer dated contracts”.

 

“This has reinforced the optimism over China's monetary policy settings, with a range of stories doing the rounds. Certainly something seems to be afoot”. 

 

“Uncertainty over the May RBA decision has also helped AUD outperform on crosses. But there is an obvious limit to the further gains AUD can expect from the notion of a surprise steady hand next week”.

 

“There is nothing to suggest the RBA is suddenly unconcerned about AUD, so pricing for a cut on Tue is likely to linger >50% if AUD/USD hovers around 0.80 into the meeting”.

 

“Westpac's view remains that the RBA will cut on Tue and not specifically indicate that 2.0% is the cycle low. This should help keep a lid on an otherwise buoyant AUD/USD, with fuel from short-covering of spec positions that were still very large as of the latest CFTC data. Any post-RBA dip to 0.7850 would be a buying opportunity”.

 

“A positive medium term momentum bias underpins the recent impulsive rise. This week’s break of range highs at 0.7910/40 targets a minimum extension to 0.8250/0.8300”. 

 

 

 

 

 

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Treasury yields inch higher despite weak GDP report

 

FXStreet (Mumbai) - The yields on the short duration and long duration treasury yields in the US extended gains even though the first estimate of the first quarter US GDP report showed a sharp slowdown in the economic activity. 

 

The 10-year yield in the US rose to a high of 2.081%, before falling back to 2.053% after the US Commerce Department data showed the economic growth in the first quarter slowed down to an annualized rate of 0.2%, missing the estimate of 1% by a big margin. The 30-year yield rose to 2.792%, before moving back to 2.756%. At the moment, the long-end yields have gained at least 8 basis points. 

 

Short-end yields under perform

 

The gains short-end yields – 1-year and 2-year – are relatively restricted as compared to the long-end. The 2-year yield is up 1.2 basis points, while the 1-year yield is more or less flat. The short-end of the curve mimics the short-term interest rate expectations in the economy. 

 

 

 

 

 

 

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USD/MXN recovers from lows

 

FXStreet (Edinburgh) - The Mexican peso is now shedding some of the earlier gains vs. its northern neighbor on Wednesday, taking USD/MXN to the 15.25 area.

 

USD/MXN bounces off 15.20

 

The pair dropped to fresh lows in the proximity of the 15.20 level after the US economy expanded less than previously estimates, 0.2% on an yearly basis during the first quarter vs. expectations for a 1.0% gain.

 

The pair will remain under pressure however, in light of the upcoming results from US Pending Home Sales followed by the more relevant FOMC meeting.

 

USD/MXN levels to watch

 

The pair is now losing 0.12% at 15.2384 and a breakdown of 15.1883 (low Apr.28) would open the door to 15.1149 (low Apr.16) and finally 15.0717 (low Apr.10). On the flip side, the initial hurdle lines up at 15.3924 (high Apr.28) ahead of 15.4326 (high Apr.27) and then 15.4918 (high Apr.21). 

 

 

 

 

 

 

 

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US growth disappoints, dollar pays price – BBH

 

FXStreet (Barcelona) - Mark Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, reviews the US GDP release, noting that the Dollar faced the brunt of much weaker than anticipated Q1 growth data, with investment falling 2.5%, seeing the biggest decline since 2009.

 

Key Quotes

 

“The US economy essentially stagnated in Q1, with the economy expanding 0.2% at an annualized rate. The Bloomberg consensus was a for 1% expansion, but we warned of downside risks.“

 

“The dollar, already under pressure, fell further. The euro has took out the $1.1050 level and sterling has moved above $1.54. The dollar failed to sustain gains above JPY119.00. However, with debt market shrugged it off and the dollar stabilized at lower levels.“

 

“It was a poor quarter across the board. Consumption, which jumped 4.4% in Q4 14, slowed to 1.9%, which was slightly above expectations.”

 

“Investment fell 2.5%. It is the biggest decline since the end of 2009. It appears that no other sector has managed to pick up the slack created by the investment cuts in the energy sector. Investment in oil and mining collapsed at a nearly 49% annualized pace.“

 

“Government spending did not help. State and local governments cut spending by 1.5% at an annualized pace. Spending by the Federal government rose at a 0.3% pace. Net exports were a drag, subtracting 1.25% off GDP, the largest in a year. The trade deficit widened to $522 bln from $470 bln in Q4 14. Price pressures remained modest. The core PCE deflator rose 0.9%, the smallest rise in five years.” 

 

 

 

 

 

 

 

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EUR/USD supported by narrowing UST and bund yield spread – Growth Aces

 

FXStreet (Barcelona) - With Eurozone bond yields rising on rising inflation, The Growth Aces Research Team, views that the narrowing yield spread between USD and EUR will support the single currency, hence remain bullish on EUR/USD, targeting 1.1307 levels.

 

Key Quotes

 

“The EUR/USD had rallied on Wednesday as the surprisingly soft US GDP data weighed on the USD. The Federal Reserve's post-meeting statement said the economic slowdown was probably transitory.”

 

“The EUR/USD rally is continued today after Eurozone bonds yields rose on easing deflation fears. The Eurozone ended four months of deflation in April with consumer prices unchanged from year-ago levels. Core inflation, which excludes volatile energy and unprocessed food costs, was unchanged at 0.6% yoy.”

 

“We expect inflation to rise gradually in the coming months. We will see stronger acceleration in CPI in the fourth quarter this year due to base effects.”

 

“10-year bond yields for Italy and Spain are now 25-30 bps higher than when ECB’s quantitative easing programme started. Bond yields in France, Belgium, Netherlands, Austria and Finland are already at the same levels when the QE started (or even slightly higher). 10-year German Bund yields are getting closer to levels seen before the ECB started buying bonds.”

 

“The spread between US Treasuries yields and German Bund yields has narrowed. This situation supports EUR/USD rises.”

 

“A rise in bond yields may result from the lack of liquidity in government bonds now that the central bank has snapped up large portions of the stock of debt with its quantitative easing programme. However, bonds sell-off has a global character. U.S. Treasury yields also rose, with below-forecast economic growth data and no sign of an early rate hike from the Federal Reserve.”

 

“We are looking to buy EUR/USD at 1.1040. If the order is filled the target will be above 100-dma, currently at 1.1307, but below strong resistance level of 1.1380 (high on February 26).”

 

“Resistance: 1.1248 (high Feb 27), 1.1280 (76.4% of 1.1534-1.0457), 1.1307 (100-dma)”

 

“Support: 1.1072 (session low Apr 30), 1.0960 (low Apr 29), 1.0924 (55-dma)” 

 

 

 

 

 

 

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Treasury yields rise on a sharp drop in the jobless claims

 

FXStreet (Mumbai) - The yields on the short duration and long duration treasuries in the US rose after the labor department data showed the initial jobless claims in the last week fell to 15-year lows. 

 

The 10-year yield rose to an intraday high of 2.099%, while the 30-year yield rose to 2.793. Meanwhile, the 2-year yield, which mimics short-term interest rate expectations, rose to a high of 0.606%. 

 

The initial jobless claims dropped by 34K to 262K in the week ended April 25, the lowest since April 15, 2000. The actual figure was smaller than the consensus estimate of 290K. The sharp drop in the jobless claims supports the Fed’s view that the job gains are likely to continue despite the slowdown in the first quarter. 

 

Meanwhile, the disappointing personal income and a weaker-than-expected personal spending data for March was ignored by the treasuries mainly because both the numbers were included in the first quarter GDP report released on Wednesday, showed the economy growing at only a 0.2% annual pace after a 2.2% rate in the fourth quarter. 

 

 

 

 

 

 

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Gold drops sharply to USD 1185.8/Oz

 

FXStreet (Mumbai) - Gold prices fell to a low of USD 1185.8/OZ from USD 1204/Oz levels after the sharp drop in the weekly jobless claims in the US triggered a wave of buying in the US dollar.

 

Gold: Trades below 50-DMA

 

The metal currently trades below its 50-DMA located at USD 1189.37/Oz levels. Gold, which is inversely related to the rate hike expectations, took a beating after the labor department data showed the initial jobless claims in the last week fell by 34K to 262K in the week ended April 25, the lowest since April 15, 2000.

 

Following the upbeat data, the USD index was pushed higher to 95.44 from the pre-data level of 94.71. Consequently, the metal fell to trade 2.05% lower for the day. Meanwhile, the personal spending and income report was largely ignored since it was a part of the first quarter GDP released on Wednesday. 

 

Gold Technical Levels

 

The immediate support is located at 1183.7 (Apr. 14 low), under which losses could be extended to 1175.00 (Apr. 24 low). On the flip side, a break above 1189.37 (50-DMA) could see the metal re-test its 10-DMA at 1194.27. 

 

 

 

 

 

 

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UK political uncertainty set to weigh on GBP – Rabobank

 

 

 

FXStreet (Barcelona) - Strategists at Rabobank argue that this UK election has the capacity to create more uncertainty, and that this political risk is going to weigh on the Pound going forward.

 

Key Quotes

 

“The political uncertainties this year appear to be extremely high. There is risk that the UK may have to wait a relatively long period before a coalition government is formed. If/Once it is in place, there is fear that it may not be sufficiently coherent to last the full five years.”

 

“That said, if the 2010 election is used as a precedent, it may be assumed that election jitters in sterling may be fairly muted in the coming weeks.”

 

“We would argue, however, that this election has the capacity to create more uncertainty than the last. Firstly, opinion polls have not been universally showing that the ‘business friendly’ Tory party is in the lead. Secondly, that ‘business friendly’ tag is confusing since if the next coalition is led by the Tories, a referendum on EU membership is likely.”

 

“The risk that the UK could leave the EU has the potential to worry international investors more than the general election itself. Given also the unknowns regarding the composition and coherence of the new government, on almost all outcomes the uncertainties for investors could rise post election. This could weigh on sterling going forward.” 

 

 

 

 

 

 

 

 

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EUR/GBP likely to rise to 0.7350 – FXStreet

 

 

FXStreet (Barcelona) - FXStreet Editor and Analyst, Omkar Godbole, sees further gains possible for EUR/GBP towards 0.7350, with both fundamentals and technicals likely to support the bullish view.

 

Key Quotes

“The pair is likely to close today above its 50-DMA located at 0.7228. Sharp gains on Wednesday and today could trigger a technical correction tomorrow. However, the losses are likely to be restricted around 50-DMA at 0.7728.”

 

“A break above 0.7274 could see renewed buying interest, thereby opening doors for 0.7319-0.7329.”

 

“Further gains to 0.7350 are likely in case the pair manages to close above 0.7329.” 

 

 

 

 

 

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EUR/JPY extends gains above 134.00

 

 

FXStreet (Córdoba) - EUR/JPY rallied another 100 pips and reached 134.34, level last seen back in early March. 

 

Euro up, Yen down

The pair is climbing more than 1% on Thursday, extending the weekly rally to more than 500 pips. While the euro is the best performer in the currency market, the yen is falling across the baord as USD/JPY approaches 120.00 after trading bleow 119.00 just a few hours ago. 

 

EUR/JPY is about to post the highest close in almost two months as it continues to recover from 127.49 (Apr 14 low). From a technical perspective, the euro strengthened considerably yesterday after breaking a key resistance located around 131.50 - 131.70. 

 

 

 

 

 

Apr 30,2015

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Credit Agricole: Fed rate hike in September or later – eFXnews

 

 

FXStreet (Barcelona) - The team at Credit Agricole, argue that the recent and the projected US data indicate that the Fed might being its rate lift-off in September, but risks remain tilted for a later hike, as noted by eFXnews.

 

Key Quotes

 

“The key issue for the FOMC, as we see it, is the extent to which the Q1 slowdown in growth is transitory or reflects more persistent factors. We believe that the Fed will want to see convincing evidence that transitory factors were behind much of the slowdown and that the underlying fundamentals suggest that the expected Q2 growth rebound will be sustained with above-trend growth in the second half.”

 

“Above-trend growth would continue to absorb labor market slack. That should contribute to an acceleration in wages that will further sustain consumer spending and likely put some upward pressure on prices.”

 

“We see it as highly unlikely that the FOMC would have sufficient evidence to support that scenario until sometime in the third quarter. Based on our macroeconomic outlook, we believe that the most likely scenario for the Fed is to begin the process of rate normalization in September. The risks are currently tilted towards a later rather than an earlier lift-off but a spring growth rebound, solid labor markets and constructive comments from the Fed on the incoming data flow are expected to prepare the markets for a rate hike this fall.”

 

“The disappointingly weak Q1 real GDP growth (+0.2%) was a mixed picture. Some of the factors behind the slowdown were likely transitory such as the harsh winter weather impact on consumer spending and logistical supply disruptions from the West Coast port slowdown that curbed production.”

 

“We expect a rebound in current-quarter activity from these transitory depressants. However, the weakness in business investment spending and net exports will likely linger for a while.”

 

“We project real GDP growth just above 2% in Q2 but accelerating further in the second half to around a 3% growth pace.” 

 

 

 

 

 

Apr 30,2015

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ECB could revise lower its inflation forecasts – Danske Bank

 

 

FXStreet (Edinburgh) - In light of the recent inflation figures in the euro area, analysts at Danske Bank believes the ECB’s forecasts remain too optimistic, and could be revised lower in the June meeting.

 

Key Quotes

 

“Euro area HICP inflation increased to 0.0% y/y in April from -0.1% y/y in March”.

 

“Core inflation was unchanged at 0.6% y/y, as service price inflation declined to a new historical low of 0.9% y/y in April from 1.0% y/y in March. The very low service price inflation reflects that there are still no signs of higher wage pressure despite progress in the labour market”.

 

“The low core inflation increases the likelihood that the ECB will lower its core inflation forecast in June, when it will publish new projections. In March the ECB expected core inflation to average 0.8% in 2015 but with an average of 0.6% in the first four months and a continued downtrend in service price inflation, we expect it to lower its forecast. In 2016 the ECB expects core inflation to increase to an average of 1.3%, which we also believe is too high”.

 

“A lower core inflation projection from the ECB is important, as it will continue its QE purchases until it sees a sustained adjustments in inflation and not just an increase that is driven by a rebound in energy price inflation”. 

 

 

 

 

 

 

May 01,2015

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