Euro zone business wilts in May as war-driven inflation surges, pointing to Q2 GDP contraction - Reuters
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The story
Euro zone PMI data for May signals accelerating business contraction as war-driven inflation erodes demand, with indicators pointing to a Q2 GDP contraction. This stagflationary backdrop pressures EUR/USD lower, weakens European equities, and reinforces expectations of a policy divergence between the ECB (constrained by inflation) and the Fed.
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Wrong ifA ceasefire or major de-escalation in Ukraine could rapidly reverse energy inflation fears and catalyze a sharp EUR short squeeze; ECB surprise hawkishness above market pricing would also undercut the divergence thesis.
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