Eurozone May final CPI +2.0% vs +2.0% y/y prelim

Latest data released by Eurostat – 17 June 2021

  • Core CPI +1.0% vs +0.9% y/y prelim
The preliminary release can be found here. No change to the headline but a slight bump to the core reading relative to the initial estimate. On the latter, there is still some breathing room for the ECB but the pressure will be on in the months ahead.

Brazil’s central bank hikes rates by 75bp, indicates it may do so again next meeting

Banco Central do Brasil​ hikes its benchmark interest rate to 4.25%, as polls expected.

Headlines via Reuters:


  • sees continued normalization of policy at next meeting
  • sees another policy adjustment of the same magnitude at the next meeting
  • deteriorating inflation expectations may require a more forceful reduction of monetary stimulus
  • base-case scenario is for normalisation of policy towards neutral rate
  • a rate hike at next meeting depends on the evolution of economic activity, the balance of risks, inflation expectations
  • future monetary policy steps may be adjusted to ensure compliance with inflation goals
  • accompanying current inflation shocks and their potential secondary effects
  • adjustment towards neutral rate necessary to “mitigate the dissemination of the temporary shocks to inflation”
  • decision was unanimous
  • persistence of inflationary pressure more intense than expected
  • outlook for electricity rates keeping inflation under pressure in the short run


Ifo cuts German growth forecast this year from 3.7% to 3.3%

Ifo releases its latest forecasts for the German economy

  • 2021 GDP growth cut from 3.7% to 3.3%
  • 2022 GDP growth lifted from 3.2% to 4.3%
  • 2021 inflation to jump to 2.6%
  • 2022 inflation seen easing to 1.9%
The cut in the growth forecast for the year is attributed to supply bottlenecks, which in turn is also manifesting in higher price pressures i.e. inflation.
That is a reasonable argument but it also means that Ifo sees this supposed ‘transitory’ effect being more persistent especially in 2H 2021 as well.
Just take note of this in case more macro projections start to reflect similar sentiment, which in turn might turn the screws on central banks to do something.

Japan Core Machinery Orders for April +0.6% m/m (expected 2.5%)

Japan Core Machinery Orders for April +0.6% m/m

  • expected 2.5%, prior 3.7% m/m

+6.5% y/y

  • expected 8%, prior -2% y/y

Used as a capex indicator for Japan in the 6 – 9 months ahead

USD/JPY not moved too much upon this release and the trade balance at the same time.
USD/JPY chart 16 June 2021

Japan trade balance for May -187bn yen (expected Y -77bn)

Japan trade balance for May -187bn yen

  • expected Y -77bn, prior Y 253.1bn

Trade balance adjusted +43.1bn yen

  • expected Y 241.8bn, prior Y 65.2bn

Exports 0.0% m/m and +49.6% y/y

  • expected 50.8% y/y, prior 38.0% … base effects impacting y/y

Imports +0.7% m/m and +27.9% y/y

  • expected 26.6% y/y, prior 12.8%

Eurozone April industrial production +0.8% vs +0.4% m/m expected

Latest data released by Eurostat – 14 June 2021

  • Prior +0.1%; revised to +0.4%
  • Industrial production WDA +39.3% vs +37.4% y/y expected
  • Prior +10.9%; revised to +11.5%

A solid beat and upward revisions as well, so overall that’s a good report as euro area industrial output shows a decent climb in April.

Production of durable goods was up 3.4%, capital goods 1.4%, and intermediate goods 0.8%. The only downside was non-durable goods, which fell 0.3% in April.

ECB boosts 2021 and 2022 inflation forecasts

The latest HICP forecasts

  • 2021 inflation to 1.9% from 1.5%
  • 2022 to 1.5% from 1.2%
  • 2023 inflation remains at 1.4%
US CPI was at 5.0% y/y today. Are the base effects that much less in Europe? We’ll have to wait and see.
ECB forecasts
Core inflation:
  • 2021 at 1.1% vs 1.0% prior
  • 2022 1.3% vs 1.1% prior
  • 2023 1.4% vs 1.3% prior

ECB raises 2021 and 2022 GDP forecasts

The latest GDP forecasts

  • 2021 GDP +4.6% vs +4.0% prior
  • 2022 GDP +4.7% vs +4.1% prior
  • 2023 GDP +2.1% vs +2.1% prior
The consensus estimates are
  • 2021 +4.2%
  • 2022 +4.1%
  • 2023 +2.0%
These are some rosy numbers and that’s good for the euro — at least in as much as you can trust a central bank forecast. Notably, they aren’t forecasting any rate hikes and still see CPI below target through the horizon.

ECB forecasts

10-year Treasury yields continue to track lower towards 1.50%

The market is quiet but keep an eye out on Treasury yields

10-year yields are down 2.2 bps currently to 1.51% but the low today hit 1.50% earlier and that is a key level to watch from a technical perspective.
There hasn’t been much appetite for yields to move out of range per se since April (after failing to breach 1.75%) but we are seeing things start to get pinned closer to key levels with the 100-day moving average (red line) also resting nearby.
10-year breakevens have also retreated slightly to 2.36% from a high of 2.54% so the market is perhaps taking some cues from the Fed in recent weeks.
Tomorrow’s US CPI data will provide the next key catalyst for the bond market but in the meantime, a technical break may also weigh on yen pairs and the dollar later today.

World Bank global to growth reach 5.6% in 2021

World Bank on global growthThe World Bank - G20 Insights

  • Global growth to reach 5.6% 2021 up from 4.1% in January. Strongest postrecession pace in 80 years
  • Gains in global growth comes after a -3.5% contraction in 2020
  • Forecasts 2022 global growth at 4.3% and 2023 growth at 3.1%
  • Increasing global growth reflects stronger US fiscal support, and highly unequal vaccine access
  • Sees US 2020 growth that 6.8%. That is up from 5.5% in January. In 2020 the US contracted by -3.5%
  • Sees China’s 2021 growth at 8.5% versus January’s 7.9%. Contracted -2.3% in 2020.
  • Sees global inflation to rise about one percentage point in 2021. May not warrant a policy response
  • Long-term expectations point to continued low and stable inflation.
  • Market concerns about persistent higher inflation in advanced economies could cause emerging market borrowing costs to rise
  • Sees emerging markets ex-China growth at 4.4% in 2021 versus 3.4% estimate in January. In 2020 emerging markets ex-China felt -4.3%
Some pretty decent increases in growth forecasts. Not much on inflation in their report which is the driving force for the markets. The US CPI data will be released on Thursday with expectations of a 0.4% rise after a 0.8% increase last month.