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Good morning, guys. Let’s sort through the pictures and review the most important things that happened yesterday – because there was a lot of news, both in terms of economic data and politics. Let’s take it step by step and see the situation clearly.
Let’s start with numbers.
In Europe, the data was slightly weaker than before, but generally in line with expectations. Economic growth has slowed from 1.2% per year to around 0.8%. In contrast, inflation has been rising – at 2.4%, almost reaching 3%. The trend is clear: an increase of 0.6% to 0.7% every month.
But the market was prepared for this, so we didn’t see a strong reaction. As for interest rates, neither Europe nor the UK has moved as expected. What matters most here is the tone of the central bank.
The current tone is slightly hawkish – they are not ruling out the possibility of raising interest rates in the coming period, possibly starting in June. This could support EUR and GBP, but I don’t expect a very strong move.
We are going to America now.
Producer price data has been released, which is considered an early indicator of inflation as it is then reflected in consumer prices. The numbers are strong.
The composite index rose about 0.7%, rising from 2.8% to 3.5%. But more important is core inflation, not food and energy. Even if we exclude gasoline, which hit almost $5 a gallon, the rest of the commodities were up significantly, around 1.5%.
This means that inflationary pressure in the United States remains strong, and a scenario similar to 2022 may occur – a new round of interest rate hikes, which may put pressure on the market.
It also increases pressure on Trump to quickly resolve Iran and oil supply issues.
Let’s talk politics.
Yesterday was the Democratic Party’s sixth attempt to prevent U.S. intervention in the Gulf region, but failed again.
But at a critical moment: Support for the operation began to wane.
There are 101 members in the Senate, and only about 50 currently support continuation. Previously, the number was 51 or 52. That means some Republicans are starting to concede or abstain. Democrats are standing firm.
If the number of undecideds increases — especially as the election approaches — the balance could shift, and even with a Republican majority, there could be a vote to stop the process.
It’s clear that trends are starting to change, and that’s an important thing we’re monitoring.
Regarding military upgrades:
Discussions yesterday about the possibility of a US attack were later backed up by a statement from General Dan Kean, who said plans existed.
This supports oil prices, which remain high. The current number of Brent crude oil contracts is about 110, and some actual trading volumes have reached 115-120.
In other news from Russia: Refining volumes fell to 2009 levels.
But here’s an important detail:
True, refining volumes fell as a result of the attacks, but exports increased instead. Oil that is not refined domestically is sold abroad, sometimes at lower prices.
This actually increases supply in the market, which is one of the things that prevents prices from rising further.
A lot of people don’t notice this, but it’s very important.
We are here today.
The most important thing we monitor is the US PMI data. The expected numbers are relatively weak, especially given the impact of high energy prices on businesses.
While not as important as yesterday’s data, in the current situation any news can move the market.
So we follow the news carefully, but we operate as usual.
Hi everyone, I’ll see you on the course 👍