The Eurozone consumer confidence index confirmed at -5.1 in May. This is the highest level since the end of 2018 and is amongst the top 20% of all-time highs since 1985. Against this background, it is not surprising to see new highs in the European stock indices.
Inflation expectations are contributing to this push upwards sentiment indices. They put rising inflation expectations as a positive factor, suggesting that people will spend more soon. However, investors and households are worried that inflation may eat into income levels, as the driver of price increases in commodity prices rather than wage and service growth.
Earlier today, German Destatis noted a double-digit inflation rate in import prices for the first time since 2010. Besides the low base effect, we note a 6.6% price increase since the start of the year, so it looks like a further stage of inflation.
The FxPro Analyst Team
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