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What is normal, anyway?

| Posted by: Paul Donovan | Tags: Paul Donovan

  • We are not back to normal, but markets have reacquainted themselves with what normal might look like. Italian bond yields fell and the euro recovered yesterday. A consensus is forming that there will not be elections in Italy until September at the earliest. Italian President Mattarella is waiting to see if the two anti-parties can in fact form a coalition.
  • US President Trump is threatening to raise US consumer taxes, by imposing taxes on European steel and aluminum imports. Taxes are due to rise tomorrow, unless discussions can prevent that. Of course, steel imported in the shape of a car is not subject to tax.
  • Inflation numbers are on the economic agenda. French consumer and producer price data, and preliminary May Euro area consumer price data are due. The consumer prices already released by Euro area countries were stronger than expected. The Euro area inflation story may have some further risks to the upside in the coming months.
  • The Fed's fabled favored inflation measure, the PCE deflator, is due. This is for April and is therefore less vulnerable to a rise in the crude oil price (that will come later, and of course both headline and core will be affected).