ForexLive European FX news wrap: Hotter UK inflation rules out BOE move in June

Headlines:

• UK April CPI +2.3% vs +2.1% y/y expected
• Sterling gains as UK inflation slows by less than anticipated
• Traders move to pare back BOE rate cuts odds after UK CPI report
• What are the main events to look out for today?
• 10-year JGB yields touch 1% for the first time since 2013
• US MBA mortgage applications w.e. 17 May +1.9% vs +0.5% prior
• China announces countermeasures against 12 US companies and their senior executives
• ForexLive Asia-Pacific FX news wrap: NZD jumped on a more hawkish RBNZ Statement

Markets:

• NZD leads, CHF lags on the day
• European equities lower; S&P 500 futures down 0.1%
• US 10-year yields up 2.7 bps to 4.443%
• Gold down 0.3% to $2,413.92
• WTI crude down 0.6% to $78.14
• Bitcoin up 0.5% to $70,054

The highlight of the session was the UK CPI report, which came in hotter than expected. While the April readings still reflected a decline from March, it owed much to Ofgem dropping the energy price cap by 12% for UK households.

The more exasperating development for the BOE is that annual services inflation was seen at 5.9%, not much changed from 6.0% previously.

That saw traders pare back rate cut odds and effectively rules out a June rate cut. Cable rallied on the back of that in a move from 1.2710 to 1.2760 in the aftermath. Despite rate cuts odds being slashed, we are seeing sterling give back most of its earlier gains though. GBP/USD is now back down to 1.2715 as buyers fail to build on the earlier momentum surprisingly.

The dollar itself was steadier throughout the session, with yields holding higher and the risk mood in a more cautious position.

EUR/USD is down 0.2% to 1.0830 while USD/CHF is up 0.4% to 0.9145 currently. Meanwhile, USD/JPY is also seen up by 0.2% to 156.48 with eyes on last week’s high of 156.78.

Besides that, the kiwi is the lead gainer on the day but NZD/USD has given back a chunk of those gains after a more hawkish RBNZ. The pair is up 0.4% to 0.6115 but is down from a high of 0.6150 earlier.

In other markets, equities remain cautious with European indices down again and US futures also lower. The mood is soured slightly by the UK CPI report but we have Nvidia earnings to focus on after the close later today.

In the commodities space, gold is lower in a push to $2,413 while copper is also seeing its upside momentum wane in a drop back under $5 per pound.

It is on to the Fed minutes next.

This article was written by Justin Low at www.forexlive.com.