Scaremongering?
Before unpacking the title of this daily briefing, a quick update on this data heavy week. So far, the slew of economic data from the Eurozone has by and large confirmed the theme of moderating inflation across members of the currency union. No significant surprises across the numerous data types released means the Euro has been largely reflecting variations in other currencies rather than its own momentum. The theme of weak and sub-expectation business and consumer confidence has continued to play out within Europe keeping growth prospects subdued.
Further data regarding the Euro area labour markets and inflation rates are set to be released this morning and will create an early focus on EUR crosses. As of this afternoon, focus will once again switch back to the United States. The implied path of the Fed has been tracking lower amidst weak economic data. A Fed speaker scheduled soon after the European market close and the Fed’s preferred inflation measure being read will allow markets to reassess that curve ahead of non-farm payroll data tomorrow.
So, what’s the scaremongering? There has been a lot of discourse in market and public forums alike about a second spike of inflation. Will we get one, and what would it look like? Most of the analyses draw from the 1970s/80s spikes in inflations that saw soaring inflation in the 70s shadowed only by a secondary wave a decade later. The curves do look similar and the central banker’s play book certainly seems to have heeded the lessons taught nearly a quarter-century ago. Contrary to this double-peak narrative there is no reason why there should be a second spike in inflation as we have seen in the past, particularly with policymakers adamant to keep rates in restrictive territory until the price level consolidates significantly.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Porsche
Humphrey Percy
Fri 14 Mar 2025
Porsche Yet another auto company with falling sales. Only in the case of Porsche, its sales have fallen only 1% in 2024 on the previous year. However margins have fallen considerably with gross operating profit down from EUR 7.3 billion in 2023 to EUR 5.3 billion in 2024. This is enough of a wake up […]
Daily Brief – US Recession
Humphrey Percy
Wed 12 Mar 2025
US Recession In the past year the USA and indeed the whole world has been watching and hoping that the Federal reserve will succeed in bringing down inflation without causing a recession. That is the Goldilocks scenario which is described as a soft landing. Looking at the S&P 500 which has declined 7% since January […]
Daily Brief – Autonomy and Atlanticism
Humphrey Percy
Mon 10 Mar 2025
Autonomy and Atlanticism These are the stark choices that European leaders seem to be advocating to their still to catch up partially in denial electorates. At one extreme is French President Macron who is banging the drum for European self reliance and autonomy from US protection having concluded that the USA cannot be relied on. […]
