• UK March CPI +10.1% vs +9.8% y/y expected
• Dollar moves higher as sticky UK CPI stoke inflation fears
• Japanese yen under pressure as higher yields weigh
• BOJ said to be wary of tweaking yield curve control in April decision
• BOJ’s Shimizu: Appropriate to continue easing policy for the time being
• Eurozone February current account balance €24.3 billion vs €17.0 billion prior
• Eurozone March final CPI +6.9% vs +6.9% y/y prelim
• US MBA mortgage applications w.e. 14 April -8.8% vs +5.3% prior

Markets:

• USD leads, JPY lags on the day
• European equities lower; S&P 500 futures down 0.6%
• US 10-year yields up 5 bps to 3.622%
• Gold down 1.7% to $1,970.43
• WTI crude down 2.0% to $79.30
• Bitcoin down 3.8% to $29,281

It was a lively session throughout as early morning data from the UK triggered a massive reaction in markets. UK consumer price inflation continues to run hot at double-digits with food price inflation seen at its fastest pace in 45 years.

That sparked some jitters across markets as fears of more sticky inflation and higher interest rates for longer were reignited.

The pound was whippy in reaction to the data with GBP/USD jumping to 1.2440 only to fall back to 1.2410 and then rising back up to 1.2470. The reaction in cable was not helped by the dollar’s strength across the board as equities slumped while bond yields jumped higher in response to the UK data.

But as the dust settled, it is the dollar that is taking charge in the major currencies space with GBP/USD now back down near 1.2400.

EUR/USD steadily declined from 1.0970 to 1.0920 while USD/JPY moved up to hit 135.00 for the first time in a month before running into offers at the key level.

As equities are pinned lower, commodity currencies are also seen weaker with USD/CAD up 0.4% to 1.3445 and AUD/USD down 0.3% to 0.6705, just off lows of around 1.3454 and 0.6690 respectively.

In the equities space, US futures gradually built losses after a bump lower on the UK inflation numbers while European indices are holding slight losses as well amid the sluggish mood.

Elsewhere, gold is also taking a heavy knock in a push down $2,000 to $1,970 at the moment – down nearly 2% on the day. As risk appetite is sapped, oil is also dropping back under $80 and Bitcoin also falling back under the $30,000 mark.

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

A 25 bps rate hike for May is fully priced in and the OIS market is seeing the terminal rate come in at around 5% after today’s inflation report. Here’s the reaction from earlier today.

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

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• Prior +5.3%
• Market index 209.2 vs 229.5 prior
• Purchase index 161.6 vs 179.6 prior
• Refinance index 449.8 vs 477.5 prior
• 30-year mortgage rate 6.43% vs 6.30% prior

That’s a sharp retreat in mortgage activity in the past week as the interest rate of the most popular US home loan jumps higher, following the move higher in rates as well. The continued climb so far this week won’t be good news for homebuyers and will add to pressure on the housing market again, after a bit of a reprieve in the past two months or so.

/US Dollar

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

• Since cut-off date for March projections, incoming data have been mixed
• But if baseline persists, it will be appropriate to raise rates further
• By bringing rates to a sufficiently restrictive level and fostering a period of below-trend growth through dampening demand, we will counteract above-target medium-term inflation pressures

That’s a very big roundabout way of justifying their motive for raising rates further in the next meeting. Whether or not that involves a 25 bps or a 50 bps rate hike is still up for question.

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