Podcast: Eurozone flash Core CPI, FOMC rate decision and non-Farm employment data

Created: 30th April 2024

US equities recovered some of the losses over the past three weeks as better than expected corporate earnings helped offset the downbeat news on inflation. The FTSE100 was pushed into record territory last week following the BHP mining giant approach to buy Anglo American, who rejected the offer.

What happened last week.

(A forex, index, and commodity market review)

Weekly change (amount change and percentage change on the week)

FTSE +222 +2.80%

DAX +445 +2.50%

DOW +290 +0.76%

S&P +89 +1.77%

NASDQ +682 +4.00%

NIKKEI +1,263 +3.40%

Hang Seng +1,301 +7.97%

The UK markets attracted attention last week as the mining giant BHP offered to buy Anglo American. Both stocks are listed on the London sock exchange and are significant components of the FTSE100. Anglo American rejected the £31 Bln all stock offer saying that the bid “significantly undervalues” the company. Anglos American’s share price ended the week up 20% whilst BHP’s shares were 5% lower on the week. Investors expect other rivals to enter the fray with Rio Tinto and Glencore likely to table rival bids which would push BHP to increase its offer. What is likely is that Anglo American will struggle to survive and could end up being broken up. The FTSE100, already nudging into record territory, was propelled up another 100points Thursday and Friday following the announcement. What is clear is that this deal, if successful, will result in another heavyweight name leaving the London market.

US markets have been burdened by increasingly hawkish interest rate expectations over the past three weeks. Last week the first reading for US GDP in Q1 came in much lower than expected. Whilst backward looking it may help inform investors about the likelihood of future interest rate cuts. Whilst the actual value of good and services produced in the US in the first quarter was 1.6%, way lower than the consensus of 2.5%, data was further tainted by the Advance GDP Price Index which was 3.1%, stronger than the 3.0% consensus. What doses this all mean? The GDP Price Index measures the annualised change in the price of all goods and services included in gross domestic product (GDP). It serves as the broadest inflationary indicator.

Inflation is running hotter than the Fed would like whilst growth, basis this first reading is much lower than forecast. This could signal some degree of stagflation as prices remain far stickier than anticipated whilst growth is harder to come by. The impact of all this is it is likely to add further weight to and pressure on the FOMC committee to hold rates at current levels for some months.

The CME Fed watch tool now has the chance of a first-rate cut pushed right back to 7th November , tow days after the date of the US Presidential Election. Not something that Biden wanted to hear.

Investors have also started to consider the risk of a rate rise if inflation is sticker than expected and continues to edge higher. The FT reports that option market pricing implies a 20% chance of a rate rise over the next 12 months – something that would have been unthinkable just 10 weeks ago.

2-year US bonds (Treasury) yields which are sensitive to short term interest rate changes have jumped to 5.01%, a 5-month high as investors confront the risk of persistently higher-than-hoped for inflation. Just one month ago 2-year yields were 4.68%.

EURUSD +0.40 +0.38%

GBPUSD +1.22 +0.98%

USDJPY +3.69 +2.38%

Sterling was again the standout currency last week as traders absorbed the differing views from within the Monetary Policy Committee at the bank of England. Last week Hugh Pill, the Bank’s Chief economist said that he would be “relatively cautious” about cutting rates. Megan Greene, an external member of the Monetary Policy Committee appointed last July, argued that the Bank should not cut rates until there is much stronger evidence inflation is under control. This contrasted with comments by Ramsden, the deputy Governor of the Bank of England, who said earlier this month that he did not need to see much more evidence to vote for a rate cut. This MPC seems divided which is leading to more volatility in Sterling. Last week GBPUSD jumped Sterling over 1 cent recovering all the losses from the previous week. The next MPC meeting is scheduled for 9th May with the following one on 20th June, then 1st August. Analysts expect rates to be cut either at the June or August meeting, with a further two 0.25% cuts before the year-end.

The EURO ticked higher last week with focus on the FOMC this week and what guidance they may following signs of a modest build in inflation. Whilst the US markets expect no change in rates, the discussion will be helpful to determine more accurately when rates might be cut. In the Eurozone, investors will have to wait until 6th June when the ECB conduct their next Monetary Policy. Investors expect the ECB to cut rates then with a further three by year end. Any shift in these positions will see the EURO and US Dollar move in opposite directions.

Gold -54 -2.26%

UK OIL +1.49 +1.72%

US OIL +1.35 +1.64%

Gold succumbed to the rally in the US Dollar as analysts reduce expectations for rate cuts until November this year. Gold’s fall is not surprising, having rallied $400 since Mid-February as Chinese Central bank buying encouraged heavy Chinese retail buying. Gold still looks vulnerable to further pull backs with $2,150 the only significant area of support.

Oil rebounded modestly following the falls from the previous week as both Israel and Iran appeared to pull back from the brink of all out war in the middle East. Global macro events and OPEC’s supply decisions balance less optimistic demand forecasts.

Data and events in the coming week

(What traders need to look out for in the week ahead)

This week we have flash core inflation reading from the eurozone and the FOMC rate decision and update and non-farm employment change.


Eurozone Prelim CPI readings from German & Spain. Already the numbers like they will be lower than consensus. The overall Core CPI will be published Tuesday this week.


China Manufacturing and Servicers PMI. There are signs activity is picking up in China with Beijing focussing on manufacturing as the property woes continue to drag on the economy.

Eurozone Core CPI Flash estimate. First reading of CPI in the bloc with consensus 2.6% and the headline at 2.4%. Unlike the US, which has a far stronger economy, the Eurozone is likely to see inflation at or close to the 2% target in the coming months. EUR and EURO assets sensitive to this release.

US CB Consumer confidence. Stickier inflation could start to wear down the consumer. The last retail sales data suggested otherwise but almost all data suggests sticky persistent inflation will prevent the Fed from cutting rates until around the election in November.


EU Holiday in Europe in celebration of Labour Day.

US ADP non-farm employment change. Resilient. 179K new jobs in April. Less impactful than Friday’s official data from the bureau of Labour statistics.

US FOMC Policy meeting. No change in rates expected. The FOMC statement and press conference will be scrutinised for anything that could affect future rate decisions. US Dollar, US and global assets sensitive to this announcement.


UK Local and mayoral elections in England and Wales. The threat of a challenge to Sunak if the elections are bad remains but it would still look like an act of self harm for the Tories.


US Non-farm employment change. The data has seen some wild gyrations over the past three months with blowout numbers followed by revisions. The actual data has seen a buoyant employment market as growth in the US remains higher than other developed economies. Good for the US but the growth and sticky

inflation poses problems for the Federal Reserve they wait to cut rates for the first time in along while. 243K new jobs in April with unemployment rate at 3.8% and average earnings at +0.3%. US Dollar and US assets sensitive to this release.