Rate cut expectations in the US will take centre stage once again next week as inflation figures and gross domestic product estimates are both released.
Markets anticipate personal consumption expenditures (PCE) inflation, due Thursday, will have eased to 2.6% in April, against March’s 2.7%.
Core PCE is expected to have subsided from 2.8% to 2.7% in the meantime, which, following cooler consumer and producer price figures earlier in the month, will aid forecasts for rate cuts by the Fed, currently expected in December.
“The minutes from the Fed’s meeting in May, which followed three straight months of higher-than-expected inflation reports, revealed that ‘various’ participants would be willing to hike rates further if necessary,” IG analysts noted.
“While the minutes preceded the release of cooler CPI and labour market data, it was enough to see the rates market reduce the probability of a rate cut to a fraction better than a coin toss.”
A second estimate for first-quarter gross domestic product is due before this on Wednesday, expected to show 1.5% growth against 3.4% previously, alongside jobs data.
Inflation figures will also be in focus in the Eurozone, as any upside shock on an expected 2.4% rise in prices threatens anticipations for a rate cut by the ECB in June.
In the UK, shop and house price data on Wednesday and Friday respectively should delve into the health of each sector, as sales slumped in the former last month.
Consensus expectations have house prices climbing 1.3% annually this month, according to Trading Economics, or 0.2% from April, as Nationwide’s index is released on Friday.