Market Update

Last week, the financial world was intently focused on the US's latest GDP and PCE figures.
The core PCE for the US in March, which examines spending on goods and services excluding food and energy, saw a rise of 0.1% following a 0.3% increase in February. While March's consumer spending remained steady, there was a noticeable tilt towards services with a corresponding decline in goods. This trend underscores that, although inflation remains high, it is on a decelerating path.
However, the US GDP growth numbers revealed more about the Fed's ongoing battle with persistent inflation. The Q1 GDP growth was reported at 1.1%, falling short of the anticipated 2% and trailing behind Q4 2022's 2.6% growth. While consumer spending retained its vigor, the dip in business inventories, likely in anticipation of dwindling demand, clearly overshadowed it. Given these indicators, the market anticipates a 25-basis point rise in interest rates from the Fed this week.
Across the Atlantic, Europe's GDP for the first quarter grew by 0.3% compared to the last quarter. The 20 Euro-using nations saw a slight 0.1% bump in output. Despite lagging behind the projected 1.4%, this growth is being celebrated as evidence of Europe's ability to stave off a recession, especially in light of aggressive interest rate hikes aimed at curbing inflation.
However, with European inflation levels still uncomfortably high, the European Central Bank (ECB) has its work cut out. The ECB is set to increase interest rates by 25 basis points on Thursday, 4 May.