Slowly but surely

Spending and inflation picked up in the month of May, laying the framework for another rate rise later this year.

Personal Consumption Expenditures – the Fed’s favored measure of inflation – made modest gains in both the headline and core readings. A report from the Bureau of Economic Analysis showed that consumer prices excluding food and energy were up 1.4 percent from a year prior. While this is still under the Fed’s 2 percent objective, it confirms an upward trajectory for the index.

We also saw a rise in US consumer spending and incomes. Personal incomes rose more than expected in May from a month earlier, but spending only rose 0.1% after the previous two months saw gains of 0.4%.

US consumer spending is an important metric to watch. It comprises more than 2/3 of economic activity in the US. With incomes rising, we could see higher spending over the next few months.

Locked and loaded

Consumer price growth may have slowed this month. A flash estimate of CPI inflation slowed to an annual pace of 1.3 percent in June.

The euro fell on the news, but took back much of the losses as North American traders began their day.

Don’t fret – this cloud has a silver lining. Core inflation came in higher than expected and up from the month prior. This is a positive signal for the European Central Bank, which has been reluctant to scale back stimulus over concerns of weak core inflation.

It’s confirmed

The British pound fell Friday morning after disappointing growth figures. UK GDP growth was the weakest amongst EU members in the first quarter of the year, including Greece which sits on the precipice of recession.

Unchanged from flash estimates earlier this month, the UK economy advanced 0.2 percent in Q1 from Q4 2016. Q4 saw a 0.7% expansion from the previous period. Households have been spending less as higher inflation is hurting their purchasing power.

Sterling fell back below 1.30 against the US dollar after Friday’s data.

EURUSD: Euro recovered overnight losses from disappointing inflation figures to trade flat against the dollar.

GBPUSD: Sterling trading lower after growth in the first quarter was confirmed to be far below originally anticipated.

AUDUSD: Aussie dollar humming along, up slightly against the USD after Chinese PMI data jumped in June.

USDCAD: Canadian dollar higher after oil prices rose for a seventh consecutive trading session – the longest run in six months.

USDJPY: The dollar is trading flat against the yen as investors close their books for month-end, quarter-end, and the end of the first half of the year.