The European session got off to a busy start after the BOE voted to keep UK rates unchanged at 0.5% in May, as was expected, but the BOE’s future outlook turned out to be more dovish than the market had anticipated, with a downward revision of the GDP growth estimate for 2018, sending Sterling sharply lower. Once the US got going the focus turned to the US inflation figure, which also disappointed. The CPI rose by 0.2% last month, less than forecasts for 0.3%, sending both yields and the US$ lower. The CPI excluding food and energy was also lower than expected at 0.1% versus 0.2%. The YY core CPI came in at 2.1% lower than the expected 2.2%. Stocks liked the outcome as it takes pressure off the Fed to hike rates, while the metals also headed higher on the back of the softer dollar. Oil remains firm but without too much directional movement today.
Friday should be a more stable session, with a fairly empty calendar ahead. Asia will start with the NZ Business PMI and Food Price Index, the Australian Home Loans/Investment Lending for Homes data along with the Japan Vehicle Production and Machine Tool Orders for April. Europe is empty of data, while the US will only have the Import/Export Index for April, the Preliminary Michigan Consumer Sentiment Index and a speech from the Feds Bullard. Note that Mario Draghi will be speaking late in the European afternoon, which might produce some activity in the Euro. Have a good weekend
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