• UK April CPI +8.7% vs +8.2% y/y expected
• Markets move to price in an additional rate hike by the BOE after UK CPI data
• Dollar stays in favour as equities slump
• Ifo economist: German economy heading towards stagnation in Q2
• Germany May Ifo business climate index 91.7 vs 93.0 expected
• UK May CBI trends total orders -17 vs -20 prior
• US MBA mortgage applications w.e. 19 May -4.6% vs -5.6% prior
• China president Xi says wants to take Russia cooperation to a higher level
• China premier Li reaffirms pragmatic cooperation with Russia in latest meeting

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.

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

• Prior -5.7%
• Market index 205.0 vs 214.9 prior
• Purchase index 158.3 vs 165.4 prior
• Refinance index 443.0 vs 468.2 prior
• 30-year mortgage rate 6.69% vs 6.57% prior

A surge higher in rates in the past week weighed further on mortgage applications with both purchases and refinancing activity slumping heavily. The market index is the lowest since the first week of March as housing market conditions continue to be impacted adversely by the Fed’s tightening.

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

S&P 500 futures are now down 16 points, or 0.4%, with major European indices posting losses of around 1.5% to 1.8% at the moment. The sour mood is keeping the dollar underpinned, with the currency stretching gains now on the session.

EUR/USD is down 0.2% to session lows at 1.0750, with large option expiries now in play. Meanwhile, GBP/USD has erased its earlier jump post-CPI and the rejection at the 200-hour moving average has seen the pair fall further to 1.2370 currently:

That’s the lowest levels in a month for the pair with the 10 April low at 1.2344 a focus point from a technical perspective, before a potential drop towards the 100-day moving average at 1.2280.

Elsewhere, the dollar is also maintaining a decent advance against the commodity currencies with USD/CAD up 0.4% to near 1.3560 and AUD/USD down 0.7% to 0.6565 – testing the lows highlighted here.

NZD/USD is the biggest loser though as the pair is down nearly 2%, building on losses after the RBNZ earlier. The pair is now down to 0.6120 and looks poised for a test of key support at 0.6100-11 next.

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

• German economy to grow modestly in Q2
• Easing supply bottlenecks, fall in energy prices to support industry recovery
• This should also support exports, especially since global economy has regained some momentum
• Private consumption still likely to stagnate
• Price growth to fall only very gradually in the months ahead

Well, from the PMI data we can identify the contrast between the manufacturing and services sectors in Germany. The former is suffering but is marginally offset by a rather robust performance in the latter. At best, there might be modest growth but at the balance, we might just see another flat performance in Q2 for Germany.

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

• Prior -20

The order book balance is still rather subdued, even if the headline reading is a three-month high. It is still tracking below the historic average of -13 with export order balance falling sharply to -26 from -9 in the previous month. That said, UK manufacturers are at least expecting to raise prices by the smallest margin since March 2021. However, the price increases will still be much faster than the long-run average.

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

• Higher yields continue to underpin the dollar for now
• BOE’s Bailey: Inflation has turned the corner
• BOE’s Bailey: We are nearer to the peak on interest rates
• Eurozone May flash services PMI 55.9 vs 55.6 expected
• Germany May flash manufacturing PMI 42.9 vs 45.0 expected
• France May flash services PMI 52.8 vs 54.0 expected
• UK May flash services PMI 55.1 vs 55.5 expected
• Eurozone March current account balance €45.0 billion vs €21.3 billion prior
• Russia touts positive relations with China, says trade turnover may reach $200 billion

Markets:

• JPY leads, NZD lags on the day
• European equities lower; S&P 500 futures down 0.2%
• US 10-year yields up 2.9 bps to 3.747%
• Gold down 0.5% to $1,958.93
• WTI crude up 1.0% to $72.75
• Bitcoin up 1.6% to $27,331

Euro area PMI data reaffirmed growth in the economy in May, albeit at a slower pace amid a further divergence between the manufacturing and services sectors. The former is seen slumping while the latter is holding up and on the balance of things, is keeping recession risks at bay for now.

The euro was steadier early on but ultimately bowed down to the dollar as the greenback pulled higher in European morning trade.

EUR/USD stuck around 1.0790 levels before easing to 1.0770 while GBP/USD slipped from around 1.2420 to 1.2375 as the dollar flexed its muscles. The bid in the dollar is helped out by higher Treasury yields again, with equities looking more cautious on the day as well.

That is putting pressure on the antipodeans, with AUD/USD down 0.5% to 0.6620 and NZD/USD down 0.5% to 0.6250 currently.

Elsewhere, gold is marked down by 0.6% to below $1,960 while silver is being beaten up badly in a over 2% drop to $23.13 – its lowest levels since the end of March.

It’s now over to US PMI data later to see if the market mood will carry on in the session ahead.

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

• Rate hikes must be conducted carefully
• Cannot try to fight inflation with very severe increase in rates
• We do have a challenge in how we communicate

Meanwhile, BOE policymaker, Catherine Mann, is out saying that they can’t make a judgment on peak interest rates yet. Adding that the situation is data dependent. Geez. In any case, markets have adjusted higher their view on BOE rates in the past week, with the curve now seeing a peak at around 5.01%.

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

Crypto
market capitalisation rose 1.4% over the last 24 hours to $1.138 trillion.
After quiet trading on Monday, most gains came on Tuesday morning. The timing
of the move is due to news on the US debt ceiling, where there is no deal yet,
but Biden notes progress in negotiations. Ether is up 2.3% at $1856, with the
top altcoins gaining between 0.3% (Solana) and 3% (Polygon).

Bitcoin is
up 1.6% over the past day to $27.3K and earlier today climbed close to $27.5K,
the upper end of the range since the 15th. Despite the positive momentum, the
daily timeframes remain bearish, with Bitcoin trading below $27.5K.

According to
CoinShares, investments in cryptocurrency funds fell for the fifth consecutive
week to $32 million last week, with bitcoin investments down $33 million and
Ethereum investments down $1 million. Investment in funds that allow shorts on
Bitcoin fell by $1.3 million.

According to
Santiment, the number of BTC and ETH on exchanges has fallen to its lowest
level in several years, which is seen as a sign of an attitude towards
long-term holding.

News background

Mott Capital
Management founder Michael Kramer warned that Bitcoin could fall to $20K.
According to him, BTC is a leading indicator for all risky assets, so its
decline would be negative for the stock market.

Anthony
Scaramucci, founder of hedge fund SkyBridge Capital, believes that the actual
value of Bitcoin should now be $40K. According to him, we are now witnessing a
global proliferation of BTCs, similar to what happened in the late 1990s with
the rise of the internet.

Cryptocurrency
platform Bakkt is considering expanding its business in Europe in light of the
Crypto Asset Market Regulation Act (MiCA) passed in April. Bakkt currently only
offers services in the US.

US lawmakers
have drafted a bipartisan bill prohibiting the Fed from issuing the digital
dollar (CBDC). Lawmakers cited Americans‘ right to financial privacy.

This article was written by FxPro’s Senior Market Analyst Alex Kuptsikevich.

This article was written by FxPro FXPro at www.forexlive.com.

On the daily chart below for
AUDUSD, we can see that the price has recently sold off from the top of the
range and it’s now approaching the support at 0.6563. AUDUSD has been
trading within this range since the Silicon Valley Bank collapse in March, so
it hasn’t done much for 3 months now.

The USD recently started to
appreciate across the board as strong economic data suggest that the Fed may
have to do more on the interest rates front and the market is slowly pricing in
higher and higher chances of another hike in June.

AUDUSD Technical Analysis

On the 4 hour chart below, we can
see that once the price broke below the trendline, the sellers piled in
aggressively. We got a bounce recently that ended up in a continuation from the
38.2% Fibonacci
retracement level as expected. The AUD/USD price has now
started to diverge with the MACD and since we are near the bottom
of the range, this may be an early signal of a weakening bearish momentum that
will translate into a correction from the 0.6563 support.

On the 1 hour chart below, we can
see that the price action has formed a falling
wedge pattern. When the price breaks out to the upside, it generally rallies
to the top of the pattern, which in this case would be the 0.67 handle. AUD/USD
needs to break below the 0.6537 support with conviction and supported by
fundamentals to invalidate this pattern and lead to an even stronger selloff.

Meanwhile, the bearish bias remains,
and we should see the price getting to the 0.66 support first and 0.6563 after.
Watch out for the US
PMIs today as a beat should give the USD another boost, while a miss should
weaken it.

This article was written by ForexLive at www.forexlive.com.

The dollar is gaining further ground now in European morning trade and among the bigger losers today is gold. The yellow metal is down 0.7% to just under $1,956 currently as it erases the advance from Friday. Gold is now threatening a steeper fall towards its 100-day moving average (red line) once again:

That level comes in at around $1,931 and will be a key technical support to watch alongside the 50.0 Fib retracement level at around $1,935.

With 10-year Treasury yields breaking higher, there might be scope for gold prices to correct further in the days/weeks ahead. However, as mentioned before, I’d still be one for dip buying in the bigger picture but you have to pick your fights.

Looking at precious metals, gold isn’t quite the biggest loser today as we are seeing silver get hammered down by over 2% to $23.13 at the moment:

The double top pattern just above $26 was already an ominous signal before the break of the neckline around $24.65 came about. After that, it has been rather one-way traffic with the only the declines last week being halted by the 100-day moving average (red line).

That level has now been broken and could set up a sharper drop in silver next.

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