FXTRADING Economic Data Summary (Asia-Pacific | 05/29)

French Producer Prices Decline Again

France‘s producer prices weakened again in April. After rising 1.9% month-on-month in March, overall producer prices fell 2.1% in April. Prices related to mining, energy, and water plunged 10.9%, becoming the main drag on the data. In contrast, prices for manufactured goods still increased by 0.7%, though this was significantly lower than the previous month’s 2.3% gain, indicating that the recovery in industrial demand remains limited.

However, on a year-on-year basis, producer prices rose 2.1% in April after remaining largely flat in March. Although energy prices have eased in the short term, cost pressures on businesses remain elevated. What European companies are increasingly concerned about is not just energy price volatility itself, but the repeated fluctuations in costs while market demand continues to recover only slowly. FXTRADING believes that the short-term decline in French producer prices does not mean inflation risks in Europe have ended. Instability in the energy market is still disrupting corporate cost structures, while weakening pricing power in manufacturing also reflects soft overall demand across the European economy.

Pressure on Canadas Trade Structure Intensifies

Canada‘s current account deficit widened to CAD 7.18 billion in the first quarter, significantly above market expectations of around CAD 4 billion and marking the largest deficit since the second quarter of last year. The previous quarter’s figure was also revised upward to CAD 1.01 billion. Canada has now recorded deficits for 15 consecutive quarters, highlighting the continued pressure on its external trade position.

More specifically, Canada‘s goods trade deficit expanded by CAD 3.31 billion, bringing the total deficit to CAD 7.72 billion. Imports rose 5.5% in the first quarter to a record CAD 210.96 billion, driven mainly by a surge in gold and other precious metal imports. Exports increased only 3.9% to CAD 203.25 billion. While crude oil and gold exports continued to grow, automobile exports fell to a six-year low, and forestry product exports were also affected by tariffs. FXTRADING believes Canada is becoming increasingly reliant on resource-related products to support exports, while the competitiveness of its manufacturing sector continues to face pressure. If international oil or gold prices decline in the future, pressure on Canada’s current account could intensify further.

The European Central Bank Turns More Hawkish Internally

The European Central Banks meeting minutes showed that the late-April meeting, where rates were ultimately left unchanged, had actually come very close to delivering a rate hike. Although policymakers eventually held rates steady, the stance of many officials had clearly shifted in a more hawkish direction. Some members even indicated that if a formal discussion about raising rates had taken place at the time, they would not have opposed immediate action.

Policymakers are becoming increasingly concerned that the energy shock caused by the Middle East conflict is evolving into a long-term inflation problem. The minutes noted that elevated energy prices, slowing growth, and weakening confidence are creating a classic stagflationary environment. At the same time, more officials are beginning to worry that companies will continue passing higher energy costs on to consumers, potentially reigniting second-round inflation risks. FXTRADING believes the ECBs policy direction has clearly tilted toward further tightening. Even with weak economic growth, the ECB may still prioritize controlling inflation. If energy prices remain elevated, the probability of a June rate hike could continue rising.

US Core Inflation Remains Sticky

US April PCE data showed that monthly inflation pressures eased slightly. Headline PCE rose 0.4% month-on-month, below market expectations of 0.5%. Core PCE increased 0.2%, also below forecasts. In the short term, the pace of price increases in the United States has indeed moderated somewhat.

However, on an annual basis, headline PCE rose 3.8% in April, while core PCE increased 3.2%, both still well above the Federal Reserves target. Rising energy costs are gradually feeding into transportation, food, and service sectors, which continues to slow the pace of decline in core inflation. FXTRADING believes US core inflation still shows strong persistence. Against the backdrop of ongoing energy price volatility, it will remain difficult for the Federal Reserve to deliver a clearly dovish signal in the near term, and market expectations for the timing of rate cuts may continue to be pushed back.

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