A series of US economic data released in recent days has been weaker than expected, suggesting that, given the impact of the Fed’s significant monetary tightening, GDP growth is expected to slow in the coming months. the corresponding Atlanta Fed’s GDPNow index. Tellingly, the Philadelphia Fed manufacturing index unexpectedly worsened in April, falling to its lowest level since May 2020 (-31.1), while the Conference Board leading indicator of economic activity fell in March for the 12th consecutive month and hit its lowest level. over the last 2.5 years (108.4). In addition, new jobless claims increased more than expected (+5,000) last week.

Weak economic data out of the US capped the dollar index (DXY) weekly gains while favoring fixed income markets, with government bond yields slipping in recent days. However, their decline has been relatively limited as continued spread of inflationary pressures on the economy as a whole (structural inflation rose again in March to 5.6% y/y from 5.5% in February) combined with markets stabilizing after the recent turmoil. in the banking sector, forced investors to revise upward their estimates of the dynamics of interest rates in the coming months. In particular, the futures market is now looking for another 25 basis points upside. from the Fed at the next monetary policy meeting on May 3 with a probability of 88% (the highest since the collapse of Silicon Valley Bank in mid-March) and does not exclude another increase in June (probability of 23%). Accordingly, for the ECB, after new positive economic data from the eurozone (including PMI rise to an 11-month high of 54.4 in April), recent “aggressive” comments from bank representatives and a new increase in structural inflation in March (5.7% y/y), the futures market estimates another 25 bp with a 70% probability. in May, while with a probability of 30% does not exclude the possibility of a greater increase of 50 bp.

* Department of Financial Analysis and Research of International Capital Markets of Eurobank.