What are the main events to look out for today?

Today the highlights will be the Eurozone May Flash CPI and the US April PCE, which is the Fed’s preferred measure of inflation. The other notable release scheduled for today include the Swiss Manufacturing PMI and the Canadian GDP although they are unlikely to be market moving.

09:00 GMT – Eurozone May Flash CPI

The Eurozone Headline CPI
Y/Y is expected at 2.5% vs. 2.4% prior, while the Core CPI Y/Y is seen at 2.8%
vs. 2.7% prior. This report is likely to influence the market’s expectations
for the rate cuts path beyond the June meeting. In fact, hot inflation data
after strong PMIs, wage growth and labour market reports will likely trigger a
hawkish repricing in interest rates expectations from the current 55 bps of
easing seen by year-end.

12:30 GMT/08:30 ET – US April PCE

The US Headline PCE Y/Y is
expected at 2.6% vs. 2.7% prior, while the M/M measure is seen at 0.26% vs.
0.32% prior. The Core PCE Y/Y is expected at 2.75% vs. 2.8% prior, while the
M/M reading is seen at 0.24% vs. 0.32% prior. Forecasters can reliably estimate
the PCE once the CPI and PPI are out, so the market already knows what to
expect.

This report is unlikely
to change anything for the Fed as the central bank remains in a “wait and see” mode until September at
very least. In fact, despite calls of cuts in July or November, I’d say the Fed
will want to deliver the first cut on a meeting containing the SEP (barring a
quick deterioration in the labour market).

The markets have been in a negative mood the past couple of days and it looks increasingly likely that it was just about month-end shenanigans. If we get a good report (or even in line), we might see the risk-on sentiment coming back. On the other hand, hotter than expected figures might weigh on the sentiment a bit.

Central bank speakers:

• 07:30 GMT – ECB’s Vujcic (neutral – non voter in June).
• 08:30 GMT – ECB’s Panetta (dove – voter).
• 22:15 GMT/18:15 ET – Fed’s Bostic (neutral – voter).

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