12 May 2022
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US inflation slows but still high in April

By Daniel Richards

  • Inflation in the US decelerated modestly in April with the headline CPI print coming in at 8.3% y/y from 8.5% a month earlier. On a monthly basis, CPI inflation slowed to 0.3%. Much of the modest downtick was thanks to lower energy prices in April as well as base effects as price growth started to turn much higher in Q2 2021 in the US. Core CPI, however, was still relatively strong, rising by 0.6% m/m in April as domestic demand remains strong while supply conditions, for goods and labour, are more uncertain. While the overall easing in price growth will be welcome, prices in the US are still high and the April print will provide support for the Fed to carry out further 50bps hikes at the June and July FOMC meetings.
  • Even as inflation in the US remains very high officials from the Federal Reserve pushed back again on using a 75bps hike to tame prices. James Bullard, one of the most outspoken hawks and president of the St Louis Fed, said that the sequence of 50bps hikes is a “good benchmark for now” and that a 75bps hike wasn’t his expectation.
  • Lebanon’s deputy prime minister, Saade Chami, gave an update on the country’s progress in meeting conditions the IMF laid out in order to access emergency funding of USD 3bn. Three draft bills have reportedly been submitted to parliament but have failed to make any headway. The IMF conditions require substantial restructuring of Lebanon’s public finances and state run enterprises as well as likely some haircuts on the value of Lebanese government debt held by the banking system. Parliamentary elections will take place soon, narrowing the time frame for when the proposals could be approved by the current government.

Today’s Economic Data and Events

  • 10:00 UK GDP Q1 y/y: forecast 8.9%
  • 10:00 UK Industrial production y/y March: forecast 0.0%
  • 16:00 IN Industrial production y/y March: forecast 1.3%
  • 16:00 IN CPI y/y April: forecast 7.42%
  • 16:30 US Initial jobless claims Apr 30: forecast 192k

Fixed Income

  • Treasuries slumped in the immediate aftermath of the April CPI numbers but then quickly recouped their losses. Yields on the 2yr UST ended the day modest higher, up by 2bps at 2.6371% while the 10yr yield actually closed down by 7bps at 2.9207%. The US yield curve flattened by almost 10bps to 28bps overnight, down from more than 40bps at the start of the week.
  • The UAE’s initial auction of treasury bonds was more than six times oversubscribed. Two maturities were launched this week, 2yr and 3yr dirham bonds of AED 750m each. The 2yr priced at a coupon of 3.01% and the 3yrd at 3.24%.


  • Sterling was the dominant mover in currency markets overnight, falling by 0.5% to 1.2251 against the USD. EURUSD managed to fall a more limited amount, down by 0.15% at 1.0513 while USDJPY moved in favour of the yen, down by 0.37% to 129.97. There was a sharp reaction lower in most currencies against the dollar in reaction to the US inflation print which was quickly unwound but selling pressure resumed later in the day.
  • USDCAD moved toward the loonie overnight, down 0.27% at 1.2992 while NZDUSD also edged higher, up 0.16% to 0.63. Aussie dollar was unchanged.


  • The US inflation print did nothing to dispel concerns over the more rapid path of monetary tightening, and the implications thereof for equities – especially more speculative growth stocks. As such, the NASDAQ dropped another -3.2% yesterday, while the Dow Jones lost -1.0% and the S&P 500 fell -1.7% back to levels last seen in March 2021.
  • There were more positive movements in Europe following some more challenging days for the markets, and there were gains seen across the board. The FTSE 100, the DAX and the CAC added 1.4%, 2.2% and 2.5% respectively.
  • Locally, the Tadawul dropped -1.0%, the ADX -1.2% and the DFM -1.9%.


  • Oil prices bounced back sharply overnight with Brent futures gaining 4.7% at USD 107.51/b and WTI adding almost 6% to USD 105.71/b. EIA data showed a build in US commercial crude inventories, up by more than 8.4m bbl last week though SPR stocks fell by almost 7m bbl as part of the coordinated release announced earlier this year. Gasoline stocks fell by 3.6m bbl while distillates fell by nearly 1m bbl. Oil production in the US fell back by 100k b/d last week to 11.8m b/d while product supplied ticked modestly lower, down by 240k b/d to 19.23m b/d.

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Written By

Daniel Richards Senior Economist

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