04 April 2024
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Eurozone inflation heads lower

By Daniel Richards

Headline Eurozone inflation was 2.4% y/y in March, down from 2.6% the previous month and lower than the predicted 2.5%, with both France and Germany beating expectations. On a monthly basis, prices were 0.8% higher in March than in February. Meanwhile, unemployment in the single currency bloc was 6.5% in February, in line with the January figure, which was revised up from the initial 6.4% print. Easing price pressures and a weakening labour market could lead the ECB to cut sooner than previously expected, and the June cut looks increasingly nailed on.

The US ADP employment measure recorded a gain of 184,000 jobs in March, up from an upwardly revised 155,000 the previous month (from the initial reading of 140,000) and beating the consensus prediction of 150,000. The strong reading followed on from an upside surprise in the JOLTs job openings data released the previous day, and all eyes will now be on the NFP report due for release tomorrow, with a net gain of 214,000 jobs predicted. Fed Chair Jerome Powell was speaking at Stanford University yesterday, where he conceded that recent inflation prints had been a little higher than expected but said that they did not ‘materially change’ the outlook, and he still thinks it will be appropriate to start cutting rates at ‘some point this year’, albeit not until ‘we have greater confidence that inflation is moving sustainably down toward 2%.’

The hope for slowing inflation was bolstered yesterday by the ISM services index for March, where the prices paid component dropped to 53.4, down substantially from 58.6 in February and lower than the predicted 58.4. The headline reading was 51.4, down from 52.6, while employment was at 48.5, the second consecutive contractionary reading.

Turkish CPI inflation accelerated to 68.5% y/y in March, up from 67.1% in February but modestly slower than the predicted 69.1%. On a monthly basis, prices were up 3.1%, down from 4.5% previously. Core inflation rose to 75.2% y/y, up from 72.9% and in line with the consensus prediction. The rise in inflation leaves real rates deeper in negative territory even after the TCMB surprised with a 500bps hike to the one-week repo rate at its March meeting, taking it to 50.0%.

The OPEC+ joint ministerial monitory committee meeting yesterday resulted in no change in policy from the extended producers’ bloc, as had been anticipated. The statement noted a high degree of conformity from the participating countries and welcomed pledges by Iraq and Kazakhstan to compensate from previous over production. The next meeting is scheduled for June 1, when potential policy changes will likely be more in play.

Today’s Economic Data and Events

16:30 US initial jobless claims, week to March 30. Forecast: 214,000

Fixed Income

  • USTs saw modest gains yesterday, bolstered by Jerome Powell maintaining the same slightly dovish tone seen in recent commentary. Yields on the 2yr fell 2bps to 4.6723%, while the 10yr closed almost flat at 4.3472%.
  • In Europe, 10yr gilts closed down 3bps at 4.056%, while 10yr bunds closed down by less than 1bps to remain almost flat at 2.394%.


  • The dollar index has pulled back from recent highs over the past couple of days, losing 0.5% against its basket of peers yesterday, the biggest fall in a month. The drop was precipitated by slower growth in a marked slowdown in the prices paid component of the ISM services index.
  • The gains were broad based, with only the JPY closing down from the majors, dropping 0.1% to 151.7. GBP and EUR both closed up 0.6% against the greenback to 1.2652 and 1.0836 respectively.


  • US equities were mixed yesterday, with the Dow Jones closing down 0.1% but the S&P 500 (0.1%) and the NASDAQ (0.2%) closing higher.
  • Locally, the ADX closed down 0.5% while the DFM ended the day 0.7% lower.


  • Oil prices saw further gains yesterday, with both benchmarks closing higher. Brent futures added 0.5% to USD 89.5/b, while WTI closed up 0.3% at USD 85.4/b.



Written By

Daniel Richards Senior Economist

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