Will the US inflation data disturb the market?

Following the lower-than-expected employment growth in the US in May, US government bonds rose on Friday. But an important report on consumer price inflation will provide investors with a new test.

Consumer price increase the fastest speed For more than 10 years in the 12 months ending in April, analysts expect it to recover even more since then, sparking concerns about the overheating of the economy.

Economists surveyed by Bloomberg expect that data released by the Labor Department on Thursday show that the year-on-year inflation rate in May will jump from 4.2% in April to 4.7%.

Economists surveyed by Bloomberg predict that the “core” inflation rate, which excludes volatile food and energy prices, is expected to rise from 3% in April to 3.4% in May. This will be the highest level since the mid-1990s.

Federal Reserve Chairman Jay Powell has always insisted that consumer price increases are temporary and that the central bank should maintain its monthly bond purchase plan of $120 billion. On the other hand, Wall Street is discussing whether the rise in inflation will last longer than expected, and investors said that even if it is higher than April, the results in May may be too early to provide a clear signal.

Rising inflation expectations are a key factor in the sharp sell-off of US Treasuries this year, which has led to higher borrowing costs and caused several fluctuations in other markets.

“This may be the other 4% [for non-core inflation]Jason Pride, chief investment officer of Glenmede’s private wealth business, said this will temporarily strengthen the fear aspect of the equation. He added that in July and August, “we may start to see a more steady slowdown in CPI data. This will eventually start to strengthen the argument that it is temporary.” Aziza Kasumov

How will the bright prospects of the euro zone affect the European Central Bank’s policy plans?

Since the last monetary policy meeting of the European Central Bank in April, the economic outlook of the Eurozone has improved significantly.

Coronavirus lockdown is underway lift All of Europe.Vaccination is accelerate After a slow start. Business activity, consumer confidence and inflation all rebounded strongly.

But a series of European Central Bank board members said that they still think there is no reason to change policy at the meeting on Thursday. Its president Christine Lagarde even stated at the end of last month that it is now discussing controlling 80 billion yuan per month. The euro’s plan is “too early”. Bond purchase plan.

Inflation in the 19 countries of the Eurozone Skyrocketing From 1.6% in the previous month to 2% in May, it exceeded the central bank’s target for the first time in more than two years. However, ECB officials said that this is a temporary rise and will subside next year, which means that the central bank needs to maintain its supportive policy stance for longer.

Most economists agree. Holger Schmieding, chief economist at Berenberg, said: “As the current surge in overall inflation only reflects temporary factors, the European Central Bank has the ability to maintain prices for another three months.”

The problem is that some countries such as Germany will recover faster than other countries such as Italy and Spain. Credit rating agency Moody’s said in a report last week that “this will pose a challenge to the European Central Bank in adjusting its common monetary policy.” .

But Moody’s added: “We believe that the European Central Bank will maintain a highly accommodative monetary policy in the next few years, after relatively strong economies such as Germany have exhausted their idle capacity.” Martin Arnold

Will the renminbi resume its sharp rise?

After the Chinese government took measures last week to slow the sharp rise, traders will pay close attention to the yuan.

This MeasuresThe People’s Bank of China announced that it will force lenders to hold more foreign currencies-a method of regulating currencies that has not been deployed since the financial crisis.

In the past year, the exchange rate of the renminbi against the US dollar has risen by 11%, despite fluctuations last week. This rebound was carried out against the backdrop of China’s rapid recovery from the pandemic. Last year, investors scrambled to invest in Chinese stocks and bonds, further supporting the yuan.

Its strength now presents another challenge for policymakers already struggling to deal with High commodity prices And worries about leverage in an unbalanced economy.

Despite the strength of the renminbi, exports are booming, and industrial growth has fueled the country’s recovery. However, members of the central bank expressed growing concern about the impact of global commodity prices on China’s ex-factory prices.

Last month, an editorial by an official of the People’s Bank of China suggested allowing the yuan to appreciate to offset the increase in commodity prices, but the article was subsequently deleted. The strengthening of the renminbi against the dollar makes Chinese imports cheaper.

This week, the trade and inflation data released on Monday and Wednesday respectively will further reveal economic progress and provide information for future central bank policy interventions in the renminbi. Thomas Hale