• 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.

• Prior +0.5%
• Market index 201.9 vs 198.1 prior
• Purchase index 140.0 vs 141.7 prior
• Refinance index 536.9 v 499.9 prior
• 30-year mortgage rate 7.01% vs 7.08% prior

Mortgage applications moved up in the past week but owed to a jump in refinancing activity. That is slightly offset by a drop in purchases activity, even as the average rate of the most popular US home loan eased further to near 7%.

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

The USD has been
generally under pressure since the benign US CPI report last week as the
hawkish expectations subsided and the market switched its focus from inflation
back to growth. This triggered a positive risk sentiment which is generally
negative for the greenback and benefited the other major currencies.

The NZD, on the
other hand, got a boost today from a hawkish RBNZ
decision where the central bank pushed further out the timing for a rate
cut and even added that they considered a rate hike. The currency should remain
supported amid the positive risk sentiment and a hawkish RBNZ for the time
being.

NZDUSD Technical
Analysis – Daily Timeframe

On the daily
chart, we can see that NZDUSD broke above the trendline recently following the US CPI report and consolidated
around the highs. This has opened the door for a rally into the 0.6217 swing
level and should give the buyers more conviction especially after the hawkish
RBNZ decision.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour
chart, we can see that from a risk management perspective, the buyers will have
a good risk to reward setup around the upward trendline where they will also
find the 50% Fibonacci
retracement
level for confluence. The sellers, on the other hand, will want to see the
price breaking lower to invalidate the bullish setup and position for a drop
into the 0.60 handle.

NZDUSD
Technical Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that we’ve been stuck in a range between the 0.6095 support and 0.6140 resistance. Another breakout to the upside
should see the buyers piling in more aggressively to extend the rally into the
0.6217 level although it’s unlikely that we will see it today as we have the
upper limit of the average daily
range right at the
resistance.

The FOMC Minutes or the US PMIs might boost the USD in the short term and provide a dip-buying opportunity as long as there are no worrying inflationary comments in the PMIs.

Upcoming
Catalysts

Today we have the FOMC Minutes late in the day although it’s
unlikely to be market moving. Tomorrow, we will get the New Zealand Q1 Retail
Sales, the US PMIs and the latest US Jobless Claims figures.

This article was written by Giuseppe Dellamotta at www.forexlive.com.