Headlines:
Markets:
- JPY leads, NZD lags on the day
- European equities lower; S&P 500 futures down 0.4%
- US 10-year yields down 2.5 bps to 3.675%
- Gold up 0.3% to $1,981.22
- WTI crude up 1.7% to $74.14
- Bitcoin down 1.8% to $26,727
The UK CPI data was the main highlight in European trading today, with core annual inflation running hot at its fastest pace since March 1992. Headline annual inflation did fall in April but was higher than estimated, though that owes mostly to base effects adjustment on energy prices.
The sticky inflation numbers saw the rates market move to price in an additional rate hike by the BOE in the months ahead, with the peak in the bank rate now seen above 5.25% from roughly 5.00% before the data.
The pound got a brief lift on it as well, with GBP/USD touching 1.2465 only to fall back upon testing its 200-hour moving average. The drop was compounded further by a stronger dollar, as risk sentiment soured in the aftermath of the hotter inflation numbers. The pair then fell to a low of 1.2365 before keeping around 1.2390 now.
As risk sentiment took a hit, the dollar and yen are the two lead gainers today for the most part. EUR/USD dropped earlier to 1.0750 but large option expiries at the level is holding the line for now, before the pair trades back to near unchanged levels now at 1.0770.
Looking at stocks, European indices slumped early on in a catch up to Wall Street losses yesterday but extended the declines after the UK CPI data. That also saw US futures turn light gains into losses on the session with bond yields caught in a bit of a tailspin so far today.
Going back to FX, the kiwi is the biggest loser as it owes much to the RBNZ policy decision earlier. The central bank signaled an end to rate hikes and that already saw NZD/USD drop 1% in Asia before extending its declines to near 2% in Europe in a fall to 0.6117, before holding around 0.6130 now.
In the commodities space, gold is fighting back with a bounce above $1,980 but the likes of copper and iron ore are facing trouble with some steep losses today.