Morning from Copenhagen.

We’re getting very benign March inflation numbers out of Europe this morning, with both France and Spain coming in softer than the already weak consensus. March is typically a hot month in NSA terms, so these numbers stand out.

In seasonally adjusted terms, Spain printed at -0.1% MoM and France at -0.4% MoM—complete opposite developments compared to what we’ve seen in countries like Canada recently, where tariff threats have driven prices higher across exporting sectors. While textbooks will tell you that tariffs should hit the importing country hardest inflation-wise, reality is proving a bit more nuanced.

This leaves the ECB with a very dovish setup, as markets are already pricing in an April cut with 86% probability. It’s not unlikely that the ECB will adopt a similar strategy to the BoC by frontloading cuts to cushion the economic damage ahead of tariffs—despite multiple ECB officials noting that they now see rates as “neutral.”

Trump has made it clear that tariff hikes toward Europe and Canada are on the table if those regions push back against the U.S. Carney’s remark yesterday that “the relationship Canada had with the United States is over” is a strong signal that Ottawa intends to retaliate—which may end up backfiring more on the Canadian economy and the BoC than anyone else.

Chart 1a: Spanish Inflation Was Surprisingly Soft