Coffee Break

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  • Week

Last Week in a Nutshell

  • Regional divergences among central banks are starting to appear. After stating last February, it would not raise rates before 2024, the Swedish Riksbank just did so (by 25bps to 0.25%). Meanwhile, the Bank of Japan will keep buying bonds. The JPY depreciated against the USD to levels not seen since 2002.
  • Euro zone Consumer Prices increased by 7.5% YoY in April and will make ECB policymakers very uncomfortable. Core CPI, which strips out the impact from food, energy, alcohol and tobacco, accelerated much quicker, thereby increasing the odds of a first interest rate hike by the ECB on July 21st.
  • Despite a soft headline Q1 GDP (-1.4% annualized rate), nominal GDP increased at a strong 6.5% QoQ annual rate, thereby contributing to the rise in S&P 500 profits.
  • Russia's state-owned gas company, Gazprom, informed Bulgaria and Poland that only roubles could buy Russian gas. Russia is fighting sanctions while the EU is eager to become increasingly energy-independent.

What's Next?

  • In the FOMC’s subsequent press briefing, Fed Chair Jerome Powell will explain the size of the interest rate hike. The central bank is accelerating its tightening, aiming for an inflation level back in line with its target without jeopardizing the economic recovery.
  • The Bank of England will meet for the third time this year. A fourth successive hike by 25bps is expected in market forecasts. Supporting the BoE’s tightening stance, April's flash UK PMI survey pointed to rising inflationary pressures.
  • April Global PMI data releases will provide an update on the health of the economy. Recent soft data implied further deterioration ahead in the manufacturing PMI led by a slowdown in new orders’ growth and a fall in global trade.
  • The US job report will be published. While hourly earnings are expected to rise by 5.5%, the unemployment rate is expected to remain at 3.6%.

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