Prepare for Unwelcome Core Inflation

The report warns of a likely jump in Eurozone core inflation to 2.6% in May due to calendar noise, advising caution as markets remain sensitive to upside surprises.

Key Takeaways

• 1.Markets are reacting poorly to upside surprises in core inflation, even when the data is noisy or methodologies-driven.
• 2.Eurozone core inflation is forecasted to jump to 2.6% YoY in May, largely due to calendar effects like long weekends.
• 3.Traders should prepare for nominal bear flattening or consider Relative Value (RV) inflation trades, specifically selling French CPI against buying Eurozone HICP.

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