Forexlive European FX news wrap: Slow session as we await the US PCE release ...Middle East

The Fed's preferred inflation measure is expected to show another improvement in AprilItaly April PPI +2.6% vs +3.9% y/y priorItaly May preliminary CPI (HICP) +1.9% vs +1.9% y/y expectedECB's Panetta: Reduced room to cut rates further, but macro outlook remains weakItaly Q1 final GDP +0.3% vs 0.3% q/q prelimEurozone April M3 money supply +3.9% vs +3.7% y/y expectedBavaria April CPI +2.1% vs +2.1% y/y priorSwitzerland May KOF leading indicator index 98.5 vs 98.4 expectedSpain May Flash CPI (HICP) Y/Y +1.9% vs +2.0% expectedGermany April retail sales -1.1% vs 0.2% m/m expectedBoE’s Taylor: Higher inflation not coming from demand and supply pressures

Nonetheless, the ECB members are starting to look for a pause after the June's reduction. Today, ECB's Panetta, who is a dove, sounded more neutral as he said that there's now reduced room to cut rates further given that they are now in their estimated range of neutral rates (1.75%-2.25%).

In the American session, we get the US PCE price index data, which is the Fed's preferred inflation measure, the Canadian GDP report and the final UMich consumer sentiment. Neither of those should change much in terms of interest rates expectations, but always watch out in case we get notable deviations from the expected numbers.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

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