US Inflation Slows in April, ECB’s Lagarde Gives July Rate-Hike Signal

US inflation growth slowed by 50% month on month in April as traders mull “inflation plateau” impact. ECB president Lagarde gives a July rate-hike signal, EUR falls on growth fears. GBP lower on worrying slew of data weakness. Equities, Oil and gold weaker as USD holds near highs.

Key Factors for Today

• US inflation beats April estimates but slows from March
• Risk off as USD holds
• ECB’s Lagarde gives July rate-hike signal 
• EIA Records large weekly surplus 

Coming Up

• USD PPI 
• USD unemployment claims
• GBP NIESR GDP estimate

USD Muted Following CPI Beat

The US Dollar is trading in a very subdued manner across the European open on Thursday. The greenback was initially higher following yesterday’s US CPI release which saw headline and core CPI both come in above forecasts at 0.3% m/m and 0.6% respectively, versus estimates of 0.2% and 0.4% respectively. However, as traders digested the results, the Dollar failed to see a proper breakout. Given that inflation has visibly slowed down from the prior month’s more than 1% gain, traders are faced with a little near-term uncertainty, clearly reflected in the US Dollar Index price action we’re seeing today. 

Equities Mostly lower As USD Holds at Highs

Equity markets are seeing mixed action as traders in Europe hit their desks on Thursday. The FTSE is down around 0.4% on the day while the DAX has rebounded sharply on the back of yesterday’s 1.73% gains. US futures and Asian stock markets, however, have both fallen to fresh lows today on the back of yesterday’s better-than-expected US CPI reading. 

JPY Leads in FX, EUR Falls on Lagarde Rate-Hike Signal 

In FX, the Japanese Yen is once again leading the pack as a softer US Dollar has seen JPY benefitting from greater safe-haven flows amidst the current equities rout. 

EUR has weakened on the back of Lagarde’s signal yesterday that a rate hike could come as early as July. Recent commentary from ECB members has been turning decidedly hawkish. However, this is the first clear signal we’ve heard from Lagarde. Given the reaction in EUR, it seems markets are concerned about the impact that monetary tightening in the eurozone will have on growth. 

GBP Sold on String of Data Misses 

GBP is under heavy selling pressure today following a slew of weaker-than-expected data this morning, underscoring fears of a slowdown. GDP, trade balance, industrial and manufacturing production all came in below estimates with construction output the only positive to note. Following the BOE’s recent warning, GBP looks likely to head lower near-term. 

Gold & Silver Struggling Following CPI Beat

Gold and silver prices remain at the bottom of recent declines. Gold trading mostly flat across the European open while silver has been weighed on a little more by the drop in US stocks. Yesterday’s US CPI print fell short of initiating a corrective move in USD meaning that metals will likely stay pressured for now. 

Oil Lower Following Yesterday’s Bearish EIA Release 

Crude oil prices are trading lower over the European open on Thursday. This comes on the back of solid gains yesterday, despite the EIA reporting a huge 8.5 million barrel surplus in commercial industries. The more important backdrop remains the ongoing issue of how the EU will sanction Russian oil. With energy supply tightness a key theme currently, oil prices look likely to remain supported.