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Daily Pivots: (S1) 1.3112; (P) 1.3205; (R1) 1.3271; More...

Intraday bias in GBP/USD is turned neutral with current retreat. On the downside, below 1.3138 will extend the correction from 1.3442 to 55 D EMA (now at 1.3067) and below. But downside should be contained by 38.2% retracement of 1.2099 to 1.3442 at 1.2929 to bring rebound. On the upside, above 1.3321 minor resistance will turn bias back to the upside for retesting 1.3442.

In the bigger picture, price actions from 1.3433 are seen as a corrective pattern to the up trend from 1.3051 (2022 low). Rise from 1.2099 could either be resuming the up trend, or the second leg of a consolidation pattern. Overall, GBP/USD should target 1.4248 key resistance (2021 high) on decisive break of 1.3433 at a later stage.

Daily Pivots: (S1) 0.8367; (P) 0.8421; (R1) 0.8512; More….

Intraday bias in USD/CHF is turned neutral with current retreat. Strong resistance is expected from 38.2% retracement of 0.9200 to 0.8038 at 0.8482 to limit upside. Break of 0.8330 resistance turned support will turn intraday bias will turn bias back to the downside. Further break of 0.8184 will bring retest of 0.8038 low. However, sustained trading above 0.8482 will dampen this bearish view and target 61.8% retracement at 0.8756 next.

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 0.8750) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Daily Pivots: (S1) 146.56; (P) 147.61; (R1) 149.50; More...

Intraday bias in USD/JPY remains mildly on the upside at this point. As noted before, fall from 158.86 could have completed 139.87 already. Further rise should be seen to 61.8% retracement of 158.86 to 139.87 at 151.60 next. On the downside, below 145.70 minor support will turn intraday bias neutral again first.

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.

The Consumer Price Index (CPI) rose 0.2% in April, after falling 0.1% month-on-month (m/m) in March. On a twelve-month basis, CPI was up 2.3% (from 2.4% in March).

• The energy index rose 0.7% m/m, as a jump in electricity and natural gas costs more than offset the pullback in gas prices. Meanwhile, grocery store prices declined 0.4% m/m, with the year-ago measure slowing to 2.0%.

Excluding food and energy, core inflation rose 0.2% m/m, following a cooler than expected 0.06% m/m gain in March. The twelve-month change held at 2.8% for the second consecutive month.

Services prices (+0.3% m/m) rebounded in April, after having recorded its softest monthly gain since August 2021 the month prior.

• Primary shelter costs (+0.4% m/m) remained a key driver of price pressures, though non-housing services (April: +0.1% m/m vs. March: -0.2% m/m) also firmed. This was largely due to a rebound in vehicle insurance premiums (April: +0.7% m/m vs. March: -0.8% m/m) and further gains in medical care services (+0.5% m/m).
• Meanwhile, most discretionary service spending categories including recreational (-0.3% m/m), airfares (-2.8% m/m) and other personal services (-0.4% m/m) recorded price declines last month.

Core goods inflation rose 0.1% m/m, following a modest pullback the month prior. Small gains were seen in household furnishings, medical care products, recreational and other goods.

Key Implications

Price pressures heated up a touch in April, but that was after a very subdued reading the month prior. Most of the uptick was driven by firmer services prices, with higher shelter costs accounting for the nearly two-thirds of the gain in core inflation. And while goods prices also turned higher last month, there was little evidence to suggest that the uptick was driven by President Trump's sweeping tariffs announced at the beginning of April. Efforts by companies to stockpile inventories and a willingness to absorb some of the tariff costs suggests a more incremental strengthening in goods prices is likely to occur over the coming months.

The U.S. and China moved to deescalate trade tensions over the weekend, with both country's agreeing to a 90-day pause on most of the tariffs imposed in April. Unequivocally, this is a step in the right direction. While it will not undo the near-term inflation impacts already in the pipeline, the administration's move to deescalate, and perceived willingness to quickly negotiate new trade deals, should help to limit the economic damage.

Daily Pivots: (S1) 1.1022; (P) 1.1132; (R1) 1.1199; More...

Intraday bias in EUR/USD is turned neutral first with current recovery. Overall, strong support should be seen from 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to bring rebound. On the upside, break of 1.1380 will suggest that the correction from 1.1572 has completed, and bring retest of 1.1572. However, sustained break of 1.1039 will dampen this view and target 61.8% retracement at 1.0709 next.

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 1.0789) holds.

Dollar softened slightly in early US trading today, though the move appears more related to a fading post-trade-deal rally than any direct reaction to economic data. While April’s inflation report showed encouraging progress on headline disinflation, the core CPI reading held firm, suggesting underlying price pressures remain sticky. That dynamic should keep Fed cautious, and today's market reaction suggests the data did little to shift expectations meaningfully. The more optimistic takeaway, however, is that recent tariffs have yet to significantly lift inflation.

In contrast, Sterling is gaining some traction, particularly against Euro, following solid UK wage data. Despite signs of softening in overall employment, wage growth remains robust, with average earnings still running well above levels consistent with BoE's 2% inflation target. BoE Chief Economist Huw Pill reinforced that concern by warning that more aggressive or sustained policy action may be needed to bring inflation under control. His remarks have helped underpin Sterling sentiment.

Overall in the currency markets, Aussie has overtaken Dollar to become the week's top performer. Kiwi and Loonie are also firm. At the other end of the spectrum, Yen continues to struggle, while Swiss Franc and Euro are also soft.

Technically, GBP/JPY is now pressing 195.95 resistance as rise from 184.35 extends. Decisive break of 195.95 will argue that choppy fall from 199.79 has completed at 184.35 already. More importantly, rise from 180.00 might then be ready to resume through 199.79 in this bullish case.

In Europe, at the time of writing, FTSE is up 0.05%. DAX is up 0.17%. CAC is up 0.23%. UK 10-year yield is up 0.021 at 4.671. Germany 10-year yield is up 0.013 at 2.666. Earlier in Asia, Nikkei rose 1.43%. Hong Kong HSI fell -1.87%. China Shanghai SSE rose 0.17%. Singapore Strait Times rose 0.13%. Japan 10-year JGB yield rose 0.06 to 1.449.

US CPI hits four year low at 2.3%, but core inflation holds steady at 2.8%

US headline CPI rose just 0.2% mom, below the expected 0.3% mom. Core CPI, excluding food and energy, also increased by 0.2%, undershooting forecasts of 0.3% mom.

On an annual basis, headline inflation eased to 2.3% yoy from 2.4% yoy, the lowest rate since April 2021. Core inflation held steady at 2.8% yoy, in line with expectations.

Shelter remained the key driver of monthly inflation, rising 0.3% mom and accounting for over half of the total increase.

Energy prices also ticked higher by 0.7% mom, while food prices declined slightly by -0.1% mom. On a year-over-year basis, energy costs dropped by -3.7%, helping to keep overall inflation in check, while food prices rose 2.8%.

BoE’s Pill: May require more aggressive and persistent effort to bring down inflation

Speaking at a press conference today, BoE Chief Economist Huw Pill warned that returning inflation to the BoE’s 2% target may prove more difficult than anticipated. Hence, Pill said the central bank may need to respond in a “somewhat more aggressive or more persistent” way to ensure inflation is brought under control within a reasonable time frame.

He raised concerns that recent shifts in wage and price-setting behavior might reflect a more "structural change", drawing parallels with inflation dynamics of the 1970s and 1980s.

Pill emphasized that investors should not interpret BoE's latest forecast, showing inflation returning to target by early 2027 based on market-implied rates, as a clear endorsement of future rate cuts.

Instead, he pointed to the Bank’s more inflationary risk scenario, which assumed persistently weak productivity and stronger wage pressures. These conditions, he said, echo past inflation crises, where elevated price levels triggered repeated and entrenched pay demands.

Last week, Pill voted against the BoE's quarter-point rate cut, aligning with fellow hawk Catherine Mann in preferring to keep rates unchanged.

UK payrolled employment falls -33k, wage growth remains elevated

UK labor market data for April showed signs of softening in employment but continued strength in wage growth. Payrolled employment fell by -33k (-0.1% mom), while the claimant count rose by 5.2k. Median monthly pay rose by 6.4% yoy in April, accelerating from 5.9% yoy in the previous month.

In the three months to March, unemployment rate in the three months to March edged up from 4.4% to 4.5%, in line with expectations and marking the highest level since late 2021.

Average earnings including bonuses rose 5.5% yoy, beating expectations of 5.2% yoy. Earnings excluding bonuses rose 5.6% yoy, slightly below forecast of 5.7% yoy.

German ZEW economic sentiment surges on stabilizing domestic politics and trade progress

Investor sentiment in Germany and the wider Eurozone improved sharply in May, with ZEW Economic Sentiment Index for Germany jumping from -14.0 to 25.2, well above the expected 9.8. Eurozone sentiment followed suit, rising from -18.5 to 11.6, also beating expectations.

According to ZEW President Achim Wambach, the rebound reflects growing optimism tied to easing trade tensions, a new German government, and stabilizing inflation, helping to offset last month’s sharp deterioration.

However, views on current conditions remain deeply negative. Germany’s Current Situation Index edged down further from -81.2 to -82.0, missing forecasts. Eurozone’s improved modestly but still stood at -42.2. This divergence suggests that while expectations for the months ahead are improving, near-term economic conditions remain fragile, particularly in Germany.

BoJ’s Uchida sees temporary inflation pause, but wage growth to persist

BoJ Deputy Governor Shinichi Uchida said today that while Japan’s underlying inflation and medium- to long-term inflation expectations may "temporarily stagnate", wage growth is expected to remain firm as "Japan's job market is very tight."

He added that companies are likely to continue "passing on rising labour and transportation costs by increasing prices".

Uchida also stressed that BoJ will assess the economic impact of US trade policy “without pre-conception,” acknowledging the high degree of uncertainty surrounding the global outlook.

BoJ opinions: Sees tariff risks but maintains flexible rate-hike stance

BoJ’s Summary of Opinions from its April 30–May 1 meeting revealed a generally cautious view on the impact of US tariffs, with board members acknowledging the potential economic damage but not seeing it as enough to derail the pursuit of the 2% inflation target.

One member noted that BoJ may enter a "temporary pause" in rate hikes due to weaker US growth. But it's emphasized that "it shouldn't be too pessimistic".

The member emphasized that rate hikes could resume if conditions improve or US policy shifts.

Other opinions highlighted the high level of uncertainty facing Japan’s economic and price outlook, driven largely by global trade tensions. One board member noted the policy path “may change at any time.”

Another reaffirmed that there has been "no change to the BoJ's rate-hike stance", as projections continue to show inflation reaching the 2% target and real interest rates remain deeply negative.

Australian Westpac consumer sentiment rises to 92.1, weak confidence supports RBA cut

Australia’s Westpac Consumer Sentiment Index rose 2.2% to 92.1 in May, partially recovering from April’s sharp decline triggered by trade-related uncertainty.

Westpac attributed the modest rebound to stronger financial markets and a decisive outcome in the Federal election. However, sentiment remains subdued, with the index still 3.9% below its March level and firmly in pessimistic territory.

With all key inflation measures now back within the 2–3% target range, Westpac expects RBA to cut the cash rate by another 25bps to 3.85%. The combination of soft domestic sentiment and a more "unsettled and threatening global backdrop" strengthens the case for further easing.

Australia’s NAB business conditions weaken to 2, profit pressures mount

Australia’s NAB Business Confidence Index edged up from -3 to -1 in April. However, the underlying Business Conditions Index slipped from 3 to 2. Trading conditions eased from 6 to 5, while profitability dropped sharply from 0 to -4, highlighting the ongoing strain on margins.

Purchase cost growth accelerated to 1.7% in quarterly equivalent terms, up from 1.4%. Labor cost growth remained elevated at 1.6%. Rising input costs appear to be eroding profitability, with businesses struggling to pass through the full extent of these increases. This was reflected in modest increases in final product and retail price growth, which rose to 0.8% and 1.4% respectively—still below the pace of input cost growth.

NAB Chief Economist Sally Auld noted that weaker profitability was at the core of the drop in business conditions, aligning with the uptick in purchase costs and softer trading performance.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1022; (P) 1.1132; (R1) 1.1199; More...

Intraday bias in EUR/USD is turned neutral first with current recovery. Overall, strong support should be seen from 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to bring rebound. On the upside, break of 1.1380 will suggest that the correction from 1.1572 has completed, and bring retest of 1.1572. However, sustained break of 1.1039 will dampen this view and target 61.8% retracement at 1.0709 next.

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 1.0789) holds.

US headline CPI rose just 0.2% mom, below the expected 0.3% mom. Core CPI, excluding food and energy, also increased by 0.2%, undershooting forecasts of 0.3% mom.

On an annual basis, headline inflation eased to 2.3% yoy from 2.4% yoy, the lowest rate since April 2021. Core inflation held steady at 2.8% yoy, in line with expectations.

Shelter remained the key driver of monthly inflation, rising 0.3% mom and accounting for over half of the total increase.

Energy prices also ticked higher by 0.7% mom, while food prices declined slightly by -0.1% mom. On a year-over-year basis, energy costs dropped by -3.7%, helping to keep overall inflation in check, while food prices rose 2.8%.

Full US CPI release here.

EUR/USD dropped to 1.1110 on Tuesday, with the US dollar surging by over 1% in the previous trading session. The rally was driven by market reactions to news of a provisional agreement between China and the US to reduce tariffs, which helped alleviate global recession fears.

Key factors driving EUR/USD movement

Washington and Beijing have agreed to cut tariffs to 30% and 10%, respectively, for 90 days.

Meanwhile, US Treasury Secretary Scott Bessent confirmed plans to meet with Chinese representatives again in the coming weeks to begin negotiations on a broader trade deal.

The tariff reductions boosted market sentiment towards the dollar, which had previously faced pressure over concerns that President Donald Trump’s trade policies were diminishing the appeal of US assets. However, market nervousness is likely to persist until the White House establishes stable trade terms with all key partners.

Attention now turns to the latest US inflation report, which may show how the new tariff policy affects prices.

Technical analysis: EUR/USD

On the H4 chart, EUR/USD broke below 1.1190, completing the third wave of decline towards 1.1065. Today, we anticipate a corrective wave retesting 1.1190 (from below). Once this correction concludes, a new downward wave towards 1.1040 is expected. This scenario is technically confirmed by the MACD indicator, with its signal line below zero and pointing decisively downward.

On the H1 chart, the market has achieved the local downside target at 1.1065. Today, a potential rebound to 1.1126 is in focus. If this level is breached upwards, a further correction towards 1.1190 may follow. Subsequently, the downward trend could resume, targeting 1.1040. This outlook is supported by the Stochastic oscillator, whose signal line is above 80 but poised to decline towards 20.

Conclusion

The US dollar’s resurgence reflects improved risk sentiment following the US-China tariff truce, though uncertainty lingers over long-term trade relations. Technically, EUR/USD remains under pressure, with further downside likely after a brief correction.

Speaking at a press conference today, BoE Chief Economist Huw Pill warned that returning inflation to the 2% target may prove more difficult than anticipated. Hence, Pill said the central bank may need to respond in a “somewhat more aggressive or more persistent” way to ensure inflation is brought under control within a reasonable time frame.

He raised concerns that recent shifts in wage and price-setting behavior might reflect a more "structural change", drawing parallels with inflation dynamics of the 1970s and 1980s.

Pill emphasized that investors should not interpret BoE's latest forecast, showing inflation returning to target by early 2027 based on market-implied rates, as a clear endorsement of future rate cuts.

Instead, he pointed to the Bank’s more inflationary risk scenario, which assumed persistently weak productivity and stronger wage pressures. These conditions, he said, echo past inflation crises, where elevated price levels triggered repeated and entrenched pay demands.

Last week, Pill voted against the BoE's quarter-point rate cut, aligning with fellow hawk Catherine Mann in preferring to keep rates unchanged.

Oil prices have been rising since the start of last week, up more than 12%. The growth comes on the back of positive news on China-US tariff negotiations. The decrease in geopolitical tensions in Russia-Ukraine and India-Pakistan relations in recent days has not had a significant impact on quotations. This may be due to a lack of confidence in progress in these areas or the concentration of market participants on positive news.

Weekly data from the US supports the optimistic approach. Over the past fortnight, the number of active oil drilling rigs has fallen to 474 from 483. This decline is due to oil producers reacting to the decline in oil prices to 4-year lows. This was also evidenced by a slight decline in production to 13.37 million bpd from 13.46 million bpd previously.

Meanwhile, commercial oil inventories have been falling by 2mbpd and 2.7mbpd in the last couple of weeks, which is the opposite of the seasonal trend of rising inventories. As a result, commercial inventory levels are now 4.6% lower than a year earlier.

Although daily timeframes show a bullish divergence (new price lows correspond to a higher RSI value), more emphasis is placed on the weekly charts. There is no similar divergence between them, and the price has yet to be tested for the April reversal area.

Only exceeding $67 per barrel of Brent and $64 for WTI will attempt to turn the rebound into growth. The final confirmation will be a strengthening of another $4 to $71 and $68, respectively. In this case, the price will recover above the former support level, which has become resistance. In addition, a recovery in this area would indicate a rise of more than 20% from the May lows, signalling the start of a bull market.