Sample Category Title

Markets

Investor focus remains centered on public finances as trade wars shifted to the background following the US-Sino truce. Global yield curves extend their bear steepening run with attention obviously on the US. US President Trump’s big beautiful bill cleared another hurdle today as House Republicans reached an agreement on raising the deduction cap for state and local taxes. The SALT increase paves the way to meet Republican House Speaker Johnson’s self-imposed deadline to pass the legislation in the House Rules Committee by Thursday and in the lower house by end of this week, ahead of Memorial Day. House Republicans currently hold a narrow 220-213 majority in the lower house (2 vacancies) suggesting they need everyone, also the spending hawks, on board to pass legislation. Markets rightly worry that these expansionary fiscal proposals will further damage already unsustainable public finances. US yields today add 3 bps to 5.3 bps (30-yr) as investors also eye tonight’s $16bn 20-yr Bond sale. Weak demand at a Japanese sale with a similar majority triggered a massive sell-off in JGB’s earlier this week. We believe that it’s only a matter of time before the US 30-yr yield tests the 2023 top at 5.17% and even takes it out to hit highest level since 2007. German Bund yields follow the bear steepening move with yields 2.7 bps to 6.2 bps up on the day. UK gilts even slightly underperform, especially at the front end of the curve following this morning’s April CPI report. Daily changes vary between +4.1 bps (2-yr) and +6.8 bps (30-yr). The UK 30-yr yield is only 10 bps away of reaching its highest level since 1998. Headline inflation accelerated to 1.2% M/M (vs 1% expected) with the annual number rising from 2.6% Y/Y to 3.5% Y/Y. Core and services inflation respectively surged to 3.8% Y/Y and 5.4% Y/Y, pushing expectation on the next BoE rate cut to November. Sterling failed to profit as the pressure on long term (core) bonds starts spilling to general risk sentiment. Main European indices cede 0.5% today with US stock markets opening up to 0.75% lower. USD/JPY (143.71) drifts towards the key 140 support area. EUR/USD extends this week’s rebound, from 1.1283 to currently 1.1335. Brent crude prices hold this morning’s gains on the back of CNN reports of plans of a potential Israeli attack against Irani nuclear facilities.

News & Views

South African inflation by rose 0.3% M/M and 2.8% Y/Y in April, in line with March (0.4% M/M and 2.7%% Y/Y) and marginally higher than expected. The increase was mainly due substantially higher food prices (1.3% M/M and 4% Y/Y). Fuel prices (-3.2% M/M & -13.4% Y/Y) partly offset the increase. The trimmed mean core inflation measure printed at 0.1% M/M and 3.1% Y/Y. The Reserve Bank of South Africa has an inflation target range of 3%-6% and its policy rate stands at 7.5%. Current low inflation in theory allows the SARB to cautiously ease its policy rate at the May 29 policy meeting. However, inflation might again pick up in H2. Recently, there were also indications from the Deputy Finance Minister that the government might consider lowering the SARB inflation target, but there is no consensus yet on the issue. The Government also published its third revised budget proposal. It downwardly revised the growth projection for this year from 1.9% in March to 1.4%. Growth for next year is seen at 1.6% from 1.7%. The new budget plans take into account spending cuts of ZAR 69.4bn over 3 year. The budget deficit now is seen at 4.8% from 4.6% in March and is declining to 3.8% in 2027/28. The debt to GDP ratio is expected to peak at 77.4% of GDP at the end of this year, from 76.2% at the previous proposal. After a brief weakening after Liberation Day to near USD/ZAR 20, the ZAR fully reversed these losses against the dollar, currently trading at the best levels YTD near USD/ZAR 17.9. The rand trades mainly stable after today’s budget announcement.

Swedish Riksbank deputy governor Anna Siem indicated that “monetary policy is currently well-balanced and that it is at present wise to await further information to obtain a clearer picture of the outlook for inflation and economic activity” as the erratic trade and security policy creates uncertainty both with respect to demand and inflation. In this situation, the need to wait for reliable signals should not be interpreted as a reluctance to act. “The neutral interest rate level we are starting from provides us with favourable conditions to navigate the uncertain road ahead’. At its May 08 policy meeting the RB left its policy rate unchanged at 2.25%, but signaled that inflation might be somewhat lower than previously assessed. This could still suggest a slight easing going forward.

Daily Pivots: (S1) 1.1239; (P) 1.1263; (R1) 1.1307; More...

Intraday bias in EUR/USD remains on the upside at this point. Correction from 1.1572 could have completed at 1.1064 already. Further rise should be seen to retest 1.1572 high first. Firm break there will resume larger up trend. Next near term target will be 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. On the downside, break of 1.1217 minor support will delay the bullish case and turn intraday bias neutral again.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0818) holds.

Daily Pivots: (S1) 0.8256; (P) 0.8309; (R1) 0.8337; More….

Intraday bias in USD/CHF remains on the downside for the moment. Corrective recovery from 0.8038 could have completed at 0.8475 already. Break of 0.8184 support will solidify this bearish case. Further break of 0.8038 will resume larger down trend to 61.8% projection of 0.9200 to 0.8038 from 0.8475 at 0.7757 next. On the upside, above 0.8347 minor resistance will delay the bearish case and turn intraday bias neutral again first.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8765) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Daily Pivots: (S1) 143.89; (P) 144.70; (R1) 145.31; More...

Intraday bias in USD/JPY stays on the downside at this point. Rebound from 139.87 could have completed as a correction to 148.64 already. Deeper fall would be seen back to retest this support. For now, risk will stay on the downside as long as 146.08 minor resistance holds, in case of recovery.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.3354; (P) 1.3375; (R1) 1.3414; More...

Intraday bias in GBP/USD stays on the upside for the moment, with focus on 1.3433/42 key resistance zone. Decisive break there will confirm larger up trend resumption. Next near term target will be 61.8% projection of 1.2706 to 1.3442 from 1.3138 at 1.3593, and then 100% projection at 1.1.3874. On the downside, below 1.3333 minor support will delay the bullish case and turn intraday bias neutral first.

In the bigger picture, up trend from 1.3051 (2022 low) is still in progress. Decisive break of 1.3433 (2024 high) will confirm resumption. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Nevertheless, sustained trading below 55 D EMA (now at 1.3124) will delay the bullish case and bring more consolidations first.

Dollar’s selloff moderated slightly during European session, but pressure on US assets remains firmly in place. DOW futures are down more than -300 points, while the 10-year Treasury yield has surged back above the 4.5% mark. Market sentiment continues to reflect unease over the US fiscal outlook and uncertainty surrounding the Trump administration’s trade stance. With the G7 finance ministers’ meeting underway, any hint that Washington may be aiming for a weaker currency will be closely scrutinized.

In the UK, despite a hotter-than-expected CPI report, Sterling failed to extend gains beyond Dollar and weakened against most other majors. A particularly striking detail in the report was the 5.4% surge in services inflation, which surpassed BoE’s own forecast of 5.0%. On a monthly basis, services prices jumped 2.2% the largest monthly rise in 34 years.

This supports recent remarks from BoE Chief Economist Huw Pill, who argued that the pace of policy easing may be too fast given the structural persistence in wage and price-setting behavior. The CPI report has clearly dampened market expectations for a summer rate cut, with odds of an August move now down to 40%, compared to 60% before the data release.

In the broader currency markets, Dollar remains the weakest performer so far today, trailed by Sterling and the Loonie. At the other end, Yen leads the pack amid safe-haven demand, followed by Swiss Franc and Euro. Aussie and Kiwi are trading in the middle.

In Europe, at the time of writing, FTSE is up 0.06%. DAX is down -0.28%. CAC is down -0.58%. UK 10-year yield is up 0.066 at 4.771. Germany 10-year yield is up 0.046 at 2.654. Earlier in Asia, Nikkei fell -0.61%. Hong Kong HSI rose 0.62%. China Shanghai SSE rose 0.21%. Singapore Strait Times closed flat. Japan 10-year JGB yield fell -0.002 to 1.521.

UK CPI surges to 3.5% in April, core jumps to 3.8%

UK inflation came in hotter than expected in April, with headline CPI rising 1.2% mom versus expectation f 1.1% mom. Annual CPI accelerated from 2.6% yoy to 3.5% yoy, above the 3% mark for the first time since March 2024.

Core CPI, which strips out energy, food, alcohol and tobacco, climbed sharply from 3.4% yoy to 3.8% yoy, its highest level since April 2024.

Breakdowns show a sharp jump in both goods and services inflation. Goods inflation accelerated from 0.6% yoy to 1.7% yoy, while services inflation climbed from 4.7% yoy to 5.4% yoy , highlighting the strength of domestic price pressures.

Japan’s US-bound exports fall -1.8% yoy as tariffs and strong Yen Bite

.Japan’s export growth slowed to just 2.0% yoy in April, marking the weakest pace since October 2024.

Notably, shipments to the US fell -1.8% yoy — the first decline in four months — as demand for automobiles, steel, and ships weakened. Exports of automobiles alone dropped -4.8% yoy by value, impacted by a stronger Yen and reduced demand for high-end models.

The decline coincides with the imposition of 25% US tariffs on Japanese auto, steel, and aluminum exports, alongside the 10% blanket levy applied to most trade partners under the current US trade regime.

Trade with Asia remained more resilient, with exports rising 6.0% yoy. However, shipments to China dipped -0.6% yoy.

On the import side, Japan saw a -2.2% yoy contraction, resulting in a trade deficit of JPY -115.8B.

Seasonally adjusted figures show a -2.7% mom drop in exports and a -1.4% mom drop in imports, with the adjusted trade deficit widening to JPY -409B.

Australia’s leading index falls to 0.2%, growth pulse fades

Australia’s Westpac Leading Index slowed from 0.5% to 0.2% in April, signaling a loss in growth momentum.

According to Westpac, the above-trend growth seen earlier this year has "all but disappeared," primarily due to rising global trade uncertainty and weaker commodity prices.

While these external pressures dominate, domestic factors such as a slowing labor market and only modest support from interest rate cuts are also contributing to the loss of momentum.

The overall picture suggests a stalling in the already tepid recovery, with GDP growth expected to reach just 1.9% by the end of 2025, well below historical averages.

Following RBA's recent 25bps rate cut to 3.85%, Westpac expects a cautious pause at the next policy meeting on July 7–8. The central bank is likely to await further clarity from the Q2 inflation data due at the end of July before considering additional easing.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3354; (P) 1.3375; (R1) 1.3414; More...

Intraday bias in GBP/USD stays on the upside for the moment, with focus on 1.3433/42 key resistance zone. Decisive break there will confirm larger up trend resumption. Next near term target will be 61.8% projection of 1.2706 to 1.3442 from 1.3138 at 1.3593, and then 100% projection at 1.1.3874. On the downside, below 1.3333 minor support will delay the bullish case and turn intraday bias neutral first.

In the bigger picture, up trend from 1.3051 (2022 low) is still in progress. Decisive break of 1.3433 (2024 high) will confirm resumption. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Nevertheless, sustained trading below 55 D EMA (now at 1.3124) will delay the bullish case and bring more consolidations first.

Gold keeps firm tone and attempts to establish above $3300 level, after the price hit the highest in over one week on Wednesday morning, in extension of Thursday’s 1.8% rally.

Fresh safe haven demand was fueled by further weakening of US dollar, which was also hurt by the US credit rating downgrade, while traders also opted to move into safety on fresh uncertainty over US Congressional debate on Trump’s tax cut bill, which could further undermine the US currency.

Adding to supportive factors for the yellow metal, was the latest media report about growing tensions between Israel and Iran.

Technical picture has improved on daily chart after fresh acceleration higher retraced 61.8% of $3437/$3120 bear-leg and also left strong support at $3200 zone, where several attacks failed to register a sustained break lower and also left a bear-trap (under $3164 Fibo support).

Daily MA’s are back to full bullish setup, 14-d momentum broke into positive territory and heading north that underpins near term action, though bulls may take a breather, as conditions on daily and 4-hr charts are overbought.

Consolidation with limited dips is seen as likely scenario in current situation, with $3280 zone (broken Fibo 50% / near session low) to ideally contain and keep fresh bulls intact.

Reaction at $3300/16 zone will be closely watched, with sustained break through these levels to confirm bullish structure and expose targets at $3362/$3400 (Fibo 76.4% / psychological).

Caution on loss of $3280 handle that would risk attack at lower trigger at $3256 (10DMA).

Res: 3320; 3347; 3362; 3400.
Sup: 3300; 3280; 3256; 3241.

The European Open

European stocks pulled back from two-month highs on Wednesday, with JD Sports and Julius Baer shares leading the decline. Meanwhile, investors stayed cautious, watching U.S. trade talks and the tax bill debate.

The pan-European STOXX 600 index dropped 0.4%, with retail and auto stocks leading the decline

Swiss bank Julius Baer saw its shares fall 4.6% after revealing a $156.4 million charge from a credit review and announcing a new chief risk officer.

JD Sports shares dropped 6.5%, making it the worst performer in the index, after the British retailer reported a 2% drop in first-quarter sales and warned that higher prices in the U.S. could reduce customer demand.

The Dax index is struggling to gain acceptance above the 24000 handle at present, with yesterday's daily candle close leaving bulls with something to consider. All sectors are currently in the red for the day excluding Utilities and Financials which have eked out marginal gains.

Source: LSEG

Will the G7 Meeting Aid the Ailing Dollar?

The US Dollar has continued its struggles this morning with the G7 meeting now underway in Canada. Safe haven currencies received a bid overnight as rumors of a potential Israeli strike on Iranian nuclear facilities ramped up geopolitical risk.

The G7 meeting kicked off yesterday and could be the saving grace the US Dollar needs at the moment. The lack of high impact US data this week has meant that the US Dollar slide has been unchallenged, but comments from the G7 meeting around trade could arrest the greenbacks slide.

Keep an eye out for any communication post the meeting or over the next day or so. Any tweaks to the language used to describe FX policy could have repercussions for the US Dollar and FX as a whole.

However, given the current climate and risks present in markets, there is also the possibility that the G7 may not want to stir up volatility and may keep their communication limited and language on FX policy unchanged.

Currency Power Balance

Source: OANDA Labs

Israel-Iran Tensions Triggers Haven Bids

Safe haven demand received a bid overnight on news that Israel might be planning to attack Iran's nuclear sites, based on U.S. intelligence.

This is happening while Iran and the U.S. are reportedly in talks to reduce tensions. A CNN report suggests that an attack on Iran's nuclear sites could be more likely if the U.S. makes a deal with Iran that doesn't fully eliminate its uranium stockpile.

However, Yesterday Irans Supreme Leader Khameini stated that he has doubts about the nuclear discussions with the US. “I don’t think nuclear talks with the U.S. will bring results. I don’t know,” Khamenei said during a speech in remembrance of Iran’s late President Ebrahim Raisi.

The impact has seen Oil prices rise temporarily and Gold continue its ascent and reclaim the $3300/oz handle. Oil prices have surrendered the initial gains but Gold continues to hold the high ground at around $3315/oz at the time of writing.

Any further developments here should be monitored as it could have a significant impact on both Gold and Oil prices.

Economic Data Releases

Looking at the economic calendar, it's another quiet day in terms of data releases from the US.

For now, keep an eye on the G7 meeting and any potential announcements around a potential escalation between Iran-Israel. Trade deal announcements also remain key should any materialize during the US session.

Chart of the day - WTI Oil

From a technical standpoint, WTI has looked poised for a continuation of the bullish move started on May 5.

However, after the initial rally WTI has been consolidating for the past 5 trading days with today's spike higher facing significant selling pressure.

For the bullish momentum to continue a daily candle close above the 63.70 swing high is needed.

Geopolitical risk with regard to Iran-Israel could also be the catalyst needed for a bullish rally.

Until then and if the status quo remains unchanged there is a possibility that the sideways price action we are witnessing may continue.

WTI Oil Daily Chart, May 21, 2025

Source: TradingView.com (click to enlarge)

Support

• 61.50
• 60.56
• 60.00

Resistance

• 63.00
• 63.70
• 65.00

Pound hits highest level since Feb. 2022

The British pound posted gains earlier but has failed to consolidate. In the European session, GBP/USD is trading at 1.3395, up 0.03% on the day. The pound has gained 1.1% this week and earlier today rose as high as 1.3468, its highest level since Feb. 2022.

UK inflation jumps to 3.5%

UK inflation jumped to 3.5% y/y in April, up sharply from 2.6% in March and above the market estimate of 3.3%. This was the highest annual inflation rate since Jan. 2024 and was driven by higher prices for transport, housing and energy. Monthly, inflation soared to 1.2%, up from 0.3% and above the market estimate of 1.1%.

The news wasn't much better from core CPI, which rose to 3.8% from 3.4% and was higher than the market estimate of 3.6%. This was the highest reading since April 2024. Monthly, the core rate jumped to 1.4%, up from 0.5% and above the market estimate of 1.2%.

The rise in inflation can be partially attributed to the increase in the energy price cap and the Easter holidays, but is a disappointment for the government and for the Bank of England, as inflation had been trending lower.

The BoE will be concerned by the rise in core inflation, which will complicate plans to further reduce rates. The BoE trimmed the cash rate by a quarter-point earlier this week to 4.25%, but rates are still higher than other major central banks, with the exception of the Federal Reserve.

The Federal Reserve is taking a wait-and-see attitude before it lowers rates again, especially with the uncertainty swirling around US tariff policy. Atlanta Fed President Raphael Bostic said this week that even reduced tariffs would be "definitely economically significant" and said he favored one rate cut this year.

GBP/USD Technical

GBP/USD tested resistance at 1.3408 earlier. Above, there is resistance at 1.3422
1.3385 and 1.3371 are the next support levels

GBPUSD 4-Hour Chart, May 21, 2025

As shown on today’s XBR/USD chart, Brent crude oil prices have jumped (as indicated by the arrow) to a one-week high. This surge follows U.S. intelligence reports suggesting that Israel may be preparing to strike Iran’s nuclear facilities.

Although CNN, citing officials, noted that it remains unclear whether Israeli leaders have made a final decision, oil prices are rising as markets price in the risk of escalation disrupting Middle Eastern oil supply chains:

→ Iran is the third-largest oil producer within OPEC.

→ There is concern that Iran could retaliate by blocking the Strait of Hormuz in the Persian Gulf — a key shipping route used by Saudi Arabia, Kuwait, and others to export oil products.

Technical Analysis of XBR/USD

Brent crude oil price has climbed towards the descending trendline (marked in black), drawn through key highs from April and mid-May. From a bearish perspective, this key resistance could trigger a downward pullback.

On the other hand, recent price action in Brent suggests upward momentum (indicated by blue lines), with the $65.20 level — previously a cap — potentially turning into support after a breakout.

Whether the black resistance line is broken will largely depend on geopolitical developments. It is possible that reports of an imminent missile strike on Iran may later be refuted.

Start trading commodity CFDs with tight spreads. Open your trading account now or learn more about trading commodity CFDs with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.