Danske Research Team
Danske Bank A/S
Overview Inflation continued to ease in both the euro area and US ahead of Trump’s large tariffs announcement. Underlying inflation is slowing especially due lower services inflation amid low goods inflation. Longer-term inflation expectations have declined significantly due to a weaker growth outlook for the world while short-term inflation expectations in the US have risen greatly due to the near-term prospects of higher goods prices in the US.
Inflation expectations: Market-based inflation long-term expectations have declined significantly by 10-15 bp after Trump’s sweeping tariff announcements due to lower oil price and a weaker growth outlook for the world economy.
US: US inflation surprised to the downside in March ahead of Donald Trump's 'Liberation Day' tariff announcements. Headline CPI declined by 0.1% m/m SA (Feb. +0.2%) while core inflation slowed down to just +0.1% m/m SA (Feb. +0.2%). Energy prices contributed negatively, while food inflation accelerated. On the core side, goods prices declined despite the looming tariff threat. Broader services inflation also slowed down, which is not a positive signal for firms' pricing power. While the data is naturally already somewhat dated, at the very least broad inflation pressures were clearly moderating before Trump unleashed the latest salvo of tariff uncertainty.
Euro: Inflation in the euro area closed in on the 2% target quicker than expected in March, with headline inflation falling to 2.2% y/y from 2.3% in February, driven by lower energy and services inflation. The latter decreased to 3.4% y/y from 3.7%, which is encouraging, although the elevated growth rate remains a concern for the most hawkish camp in the ECB. We expect the US trade war to be a disinflationary force in the euro area lowering HICP inflation by 0.2 percentage points in the coming 12 months due to weaker world demand, a lower oil price, a higher EUR/USD, and even lower prices on imported goods from China. Hence, the disinflation force is set to be amplified as EU retaliation against US remains limited.
China: March CPI increased to -0.1% y/y (cons: +0.1% y/y) from -0.7% y/y while core CPI rose 0.5 % y/y from -0.1% y/y in February in a sign of higher demand.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
AUD/USD holds steady above 0.6400 amid mixed cues
AUD/USD consolidates above the 0.6400 mark during the Asian session on Tuesday. Concerns about the rapidly escalating US-China trade war act as a headwind for the Aussie. The US Dollar languishes near a multi-year low amid the uncertainty over Trump's trade policies and the weakening confidence in the US economy.
USD/JPY recovers slightly from multi-month low; upside seems limited
USD/JPY ticks higher during the Asian session on Tuesday and recovers a part of the previous day's downfall to a fresh seven-month low, though any meaningful upside seems elusive. Trade war concerns, global recession fears, hopes for a US-Japan trade deal, and the divergent BoJ-Fed expectations should continue to underpin the JPY.
Gold price hits fresh record high amid the global rush to safety
Gold price touched a fresh all-time peak, around the $3,444-3,445 area during the Asian session on Tuesday amid worries that an all-out trade war could trigger a global recession. Doubt over Fed independence, which led to the overnight USD slump to a three-year low, and heightened Russia-Ukraine tensions act as a tailwind for the XAU/USD.
ARK Invest integrates Canada's 3iQ Solana Staking ETF into its crypto funds
Asset manager ARK Invest announced on Monday that it added exposure for Solana staking to its ARK Next Generation Internet exchange-traded fund and ARK Fintech Innovation ETF through an investment in Canada's 3iQ Solana Staking ETF.
Five fundamentals for the week: Traders confront the trade war, important surveys, key Fed speech Premium
Will the US strike a trade deal with Japan? That would be positive progress. However, recent developments are not that positive, and there's only one certainty: headlines will dominate markets. Fresh US economic data is also of interest.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.