🇪🇺❗️Cable FX Macro Weekly Note: EU May Flash CPI

**As seen in Risk In The Week report 05/26/24,subscribe at cablefxm.co.uk/reports 

Eurozone inflation has dropped to levels closer to the ECB's 2% target, the core metric is now rising by 2.7% compared to 5.6% a year ago. Transport prices eased from March while the food component remains persistent, both measures are among the top weights in the Eurostat calculations. The health prices component remains another sticky measure, the contribution to the headline rose in April to 0.15pp and is now at the highest on record. This week's data will bring colour to the disinflationary progress, while analysts expect a small rebound, the data will influence any precommitment at the ECB. The central bank has signaled a June rate cut, however, there is uncertainty whether this is a reverse to the insurance rate hike from last year or the start of a full-scale easing cycle.

Analysts at Societe Generale warned EU upside inflation risks are still present on high wage growth and weak productivity growth. Also, SocGen noted an ECB divergence from Fed policy could weigh on the euro, for this reason, they think the central bank will deliver a hawkish cut in June. SocGen sees EU headline inflation falling below 2% over the summer, they added that this will be key to the ECB Fall inflation outlook and will likely translate into a September rate cut.