US inflation slows to 2%, whilst UK remains steady at 2.3%

April 19, 2017

UK inflation figures released last week for March showed no change in the headline CPI rate at 2.3%. Price rises were driven by increases in food prices, which have previously been a drag on overall inflation. Additionally, changes in fuel costs as a result of the higher oil price and fall in the value of the pound was a significant contributor. Economists are expecting another jump in the rate for April given the timing of Easter this year causing higher relative travel costs. Higher inflation has begun to suppress real wage growth, removing the boost that consumers have received over the last couple of years. However, the UK unemployment rate remains low at 4.7% and may yet spur wage growth if employers fail to fill vacancies.


US inflation for March showed an unexpected slowing to 2%. This has caused inflation expectations for the rest of the year to fall strongly. Furthermore, investors are beginning to lose faith in the prospect of increased fiscal spending driving inflation. Failure to pass the highly publicised healthcare bill and a focus on geopolitics by President Trump has weakened and delayed the strong expectations that investors had for economically targeted policy changes. Weaker than expected non-farm payroll data for March has also raised concerns over the potential for further positive surprises from the US.


This Sunday will see the first round of the French presidential election, deciding which two candidates will go into the run-off on 7th May. The election has turned into a four-horse race spanning candidates from the far right (Le Pen) to the far left (Mélenchon). While the favoured result is a Macron, Le Pen run-off, leading to a Macron win, there is clearly potential for other outcomes. The most feared of these if for a Le Pen win, with her desire to come out of the Euro and renegotiate France’s place in the EU, potentially causing significant disruption. However, second round polling against other major candidates shows Le Pen is unlikely to win the Presidency as voters band together to keep her out of office. European securities have been trading with political risk priced in due to this election, and a favoured outcome may result in a relief rally.



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Cac 40 5135 5071 -64 -1.25%
Nikkei 225 18664 18355 -309 -1.66%
UK 10 Year Gilt Yield 1.09 1.03 -0.06 -5.50%


The US jobless rate and UK retail sales figures will be released on Thursday and Friday respectively.