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Market insight 26.04.2018

The ECB stays cautious due to low and fragile core inflation

The ECB stays cautious due to low and fragile core inflation

The ECB has not changed its current strategy

  • The ECB has recognized that the slowdown in Q1 was broad based, but it was mainly due to temporary factors; so the ECB remains confident on growth.
  • The inflation  should finally converge at/or slightly below 2%, but the ECB has noticed that the core inflation has not shown convincing signals of being on an upward trend; for this reason, a still large monetary accommodation still looks justified according to the ECB.
  • According to M. Draghi, there was no discussion on monetary policy; no pre-commitment of any change in the ECB’s communication in June.
  • As core inflation is not a firm trend, the ECB will take some time before officially shifting its communication and its strategy. This increases the probability of a change in communication only in the next July meeting and favors a smooth end of the QE in Q4-18.

 

US: Initial jobless claims (Apr.21): 209k vs 230k expected (prior: 233k revised from 232k)

  • Continuing claims: 1837 k after 1866 k.

 

US: Durable goods orders (March): 2.6% m/m vs 1.6% expected (prior: 3.5% revised from 3%)

  • Orders have been boosted by civil aircrafts (44% m/m).
  • Orders for capital goods non-defense ex aircraft (core orders) were down by 0.1% m/m after 0.9% m/m the prior month. By sector, the picture was mixed: a rebound in computers, but falling orders for machinery and flat in equipment.
  • Shipments were up by 0.3% m/m (-0.7% m/m for core orders); inventories were up by 0.1% m/m (+0.3% m/m for core orders).

 

US: Wholesale inventories (March): 0.5% m/m vs 0.7% expected (prior: 1%)

  • Inventories of durable goods were up close to 1% m/m.

 

Germany: GFK consumer confidence (May): 10.8 as expected (prior: 10.9)

  • Some cautiousness on future activity and income, despite good fundamentals.

 

Spain: Unemployment rate (Q1-18): 16.74% vs 16.45% expected (prior: 16.55%)

  • Unemployed has surprisingly decreased by close to 2% over the quarter; this could be viewed as a pause in a still positive trend.


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