The USD is mixed/little changed with the EURUSD, USDJPY and the GBPUSD all trading within 0.05% of unchanged on the day. The UK inflation data came in lower than expections helped by one off and base effects. The EU final CPI came in as expected. In the video above, I take a look at the 3 major currency pairs from a technical perspective.
Meanwhile, the AUD and the NZD are the biggest movers as they benefit from higher stocks and lower yields as the NA session begins. Needless to say, the situation in the Middle east remain on a knifes edge but Trump says they will end the war very quickly but has not ruled out more conflict as well.
Today, in review, UK inflation came in softer than expected in April, with headline CPI slowing to 2.8% year-over-year versus the 3.0% estimate and down from 3.3% previously, while core CPI eased to 2.5% from 3.1%. The biggest surprise came from services inflation, which fell sharply to 3.2% from 4.5%, helped by softer monthly price gains and a number of temporary factors. Much of the downside pressure came from housing-related costs as lower electricity and gas prices weighed on inflation, while comparisons to last year’s sharp increases in water and sewage bills also created favorable base effects. Airfares were another major drag, with prices falling this April compared to a large surge a year ago. Despite the softer report, the details suggest this is not necessarily a sign of a lasting shift lower in UK inflation. Instead, many of the declines were driven by one-off distortions and base effects, while the broader inflation outlook remains clouded by rising energy prices tied to the ongoing US-Iran conflict.
Eurozone inflation accelerated further in April, with headline CPI confirmed at 3.0% year-over-year, up from 2.6% in March, largely driven by another sharp increase in energy prices tied to the ongoing Middle East conflict. Energy inflation rose 10.8% annually, a significant jump from 5.1% previously, while monthly energy prices climbed 3.0%, making it the primary driver behind the stronger headline reading. The better news for the ECB was that core inflation remained contained, easing slightly to 2.2% from 2.3%, suggesting that broader underlying price pressures have not yet fully absorbed the higher energy costs. Services inflation also cooled modestly to 3.0% from 3.3%, while food inflation held relatively steady near 2.4%. However, the overall report still points to building inflation pressures as elevated energy costs increasingly filter through the broader economy. With the US-Iran conflict continuing and no clear resolution in sight, inflation in the euro area is expected to remain supported through Q2 and likely into the early part of Q3.
Looking at the pre-market for US stocks, futures are implying higher levels
- Dow industrial average is up 110 point
- S&P index is up 27 point
- NASDAQ index is up 176 points
After the close: the long-awaited Nvidia earnings will be released with expectations of EPS of $1.77 on revenues of $78.9 billion (of course the whisper number would be higher).
Looking at the US debt market, yields are modestly lower:
- 2 year yield 4.095%, -2.7 basis points
- 5 year yield 4.299%, -3.0 basis points
- 10 year yield 4.643%, -2.6 basis points
- 30 year yield 5.166%, -5 basis points
in other markets:
- Gold is up $14.33 or 0.32% at $4497.77 as it reacts to the lower rates
- Silver is up $2.11 or 2.84% at $75.74.
- Crude oil is down $1.50 at $102.54
- Bitcoin is up $500 and $77,305
