The expectation will be for another 8.3% y/y reading in US consumer inflation today, with the core reading expected to drop a little from +6.2% y/y in April to +5.9% y/y in May. That said, these readings will still be extremely elevated.
There's plenty of talk about peak inflation and what not but once again, there needs to be a reminder of the situation at hand. It is one thing to see inflation hit a peak and keep at high levels and a whole other thing to see it come back down to the desired 2% level.
We're very much in a situation where the former is taking charge, with estimates expecting another 0.7% monthly increase in price pressures in May. As we dive deeper into said peak inflation talk, the monthly figures will matter more in my view.
The White House has also come out to warn about the numbers today:
- White House expects inflation numbers to be released this week to be elevated
- White House believes CPI will be high due to the flow-through impact of higher oil price
It's not very often that you get these kind of statements, so that's a testament to the times these days.
In any case, there's going to be a lot of focus on what the release later has to offer - even if it may just come in within expectations. I reckon it'll be hard to chalk up any firm market moves in the build-up and that could make for quieter trading in the European morning.
Risk sentiment hit the skids yesterday as bond yields pushed higher, with the ECB not helping the case by offering no hints on how to address fragmentation risks (would have expected Lagarde to try and cover that but she did not). That saw 10-year BTP yields push up by 22 bps to 3.68%. Talk about painful. Oof.
Meanwhile, the dollar also gained strongly and the technicals will once again be a key feature in trading today as some consolidation ranges are cracking. There might be quite a lot of tension being released right after the US inflation data today, all before the weekend hits.
