Insights 
VT 
The European morning session on 13 May 2025 saw limited changes due to the lack of new information. UK employment data met expectations, though wage growth remained high for the Bank of England, and trust issues surrounding UK data persisted.
Positive signs emerged from the German ZEW and US NFIB surveys, indicating eased concerns about tariffs and growth. This may lead to improved data in the future. Central bank officials appeared more cautious on rate cuts due to easing global growth fears and potential inflationary pressures from increased demand.
Us Trade Developments
US Trade Representative Greer stated that efforts are underway to secure trade deals, aiming for a 10% global tariff rate. This could reduce uncertainty and enhance economic conditions. The upcoming US CPI report in the American session will capture attention, particularly the Core figures with a Y/Y reading expected at 2.8% and a M/M measure predicted at 0.3%.
Economic data may regain importance, although poor data could be overlooked due to changes in trade policy. The emphasis might shift from growth concerns to inflation considerations shortly.
What we have seen so far is a largely neutral session in Europe, shaped by a shortage of meaningful economic updates. The release of the UK employment report offered little surprise—headline numbers in line with expectations—but wage figures once again proved slightly stubborn from the perspective of monetary policymakers. Markets remain hesitant in treating UK labour data as fully reliable, and it’s clear that some doubts still hang over the consistency of these figures.
Elsewhere, better-than-expected results from Germany’s ZEW survey and the US’s small business sentiment from the NFIB brought a modest lift in mood. These surveys hinted at fewer concerns surrounding tariffs and outlook, hinting at a modest rebound in confidence that may begin feeding through into activity measures over the coming months.
Central Bank Reactions
However, optimism has not translated directly into higher conviction in policy easing. Commentary from various central bankers suggests a slight recalibration; there appears to be less urgency in delivering near-term rate cuts. The combination of more stable global demand and marginally higher inflation risks means that timelines for monetary adjustment might still stretch out, particularly if incoming data remain firm.
When Greer of the US trade delegation outlined ongoing discussions targeting a global tariff baseline of 10%, it prompted investors to reassess downside risks. It may not have been price-moving in isolation, but the message was clear: reduced trade friction carries the potential to re-anchor expectations and loosen the grip of uncertainty. That, in turn, bolsters the case for firmer prices and could influence inflation paths, especially if demand rises from more open trade.
Attention will turn squarely towards upcoming inflation numbers from the US this afternoon, where the focus lies almost entirely on the core reading. The year-on-year figure of 2.8% and month-on-month reading of 0.3% could prove pivotal, not just for their immediate market impact but for what they tell us about underlying price pressures, especially in services where disinflation has been sticky.
In recent months, data watchers have been forced to weigh every inflation report more carefully, especially as markets begin to absorb that activity weakness might no longer carry the same policy weight it once did. If trade tensions ease further and business sentiment continues to recover, we may need to become more responsive to higher persistence in inflation, even in the absence of obvious growth threats.
With interest rate timelines finely balanced, volatility in interest rate derivatives could rise around data prints. What matters now is the reaction function—whether a single overshoot draws a response, or if repeated firm readings are required to shift the outlook. For now, positions may need adjusting more frequently, given the reduced visibility over the policy horizon. Let’s not expect one print to dictate the path, but rather a string of consistent developments, either way.
