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According to Forex Factory, the Consumer Price Index (CPI) reading came in below expectations: while analysts had forecast a decline to 2.7% year-on-year from the previous 2.8%, the actual CPI figure was 2.6%.

Following the release of this news, the GBP/USD exchange rate rose to 1.3280 – the highest level in seven months.

On the one hand, falling inflation is a sign of a healthy economy and a relief for the Bank of England, especially considering that CPI stood in double digits just two years ago. As a result, analysts may now predict that interest rates could be cut at the meeting scheduled for 8 May.

On the other hand, demand for the dollar remains volatile due to Trump’s tariff policies, fears of a US recession, and a wave of bond sell-offs.

Technical Analysis of the GBP/USD Chart

In just one week, the pound-to-dollar rate has risen by approximately 4.2%, with the RSI indicator now hovering near extreme overbought levels. Furthermore, the price is approaching the upper boundary of the ascending channel, which has been in play since the beginning of 2025.

In such conditions, a correction (with a bearish breakout of the ascending trendline, shown in blue) appears a logical development. However, a key factor in sustaining the current trend of dollar weakness could be the speech by Federal Reserve Chair Jerome Powell, scheduled for today at 20:30 GMT+3.

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Final data confirmed that Eurozone headline inflation edged lower to 2.2% yoy in March, down from 2.3% in February. Core inflation (ex energy, food, alcohol & tobacco) also softened to 2.4% from 2.6%.

Services was the main contributor to price pressures in Eurozone, adding 1.56 percentage points to the annual rate, followed by food, alcohol and tobacco at 0.57 points. Energy contributed negatively, subtracting -0.10 points from the overall figure.

At the EU level, inflation was finalized at 2.5% yoy, an improvement from February's 2.7% yoy. France registered the lowest annual rate at just 0.9%, while Denmark and Luxembourg followed at 1.5% and 1.5% respectively. In contrast, inflation remains more persistent in Eastern Europe, with Romania (5.1%), Hungary (4.8%), and Poland (4.4%)recording the highest annual rates.

Full Eurozone CPI final release here.

The two-day global stock surge came to a halt this morning following further escalations in the US-China trade war. The Trump administration slapped fresh curbs on Nvidia chip exports to China which saw NVIDIA shares tumble post market.

The doom and gloom from the NVIDIA announcement has weighed on global stocks and indexes. Chinese technology companies drove Asian equities lower, while equity index futures in Europe and the US both struggled.

Japan’s 30-year bonds recovered as U.S. Treasury market volatility eased, and BoJ’s Ueda suggested a possible reaction to higher U.S. tariffs. However, a weak economy could threaten the BoJ's plans to slowly raise interest rates.

The only positive outcome during the Asian session appears to be around China. China's economy grew faster than expected in the first quarter, driven by strong consumer spending and industrial production.

Gold prices stole the show once again as the precious metal is trading within a whisker of $3300/oz, having risen around 1.82% to trade $3290/oz at the time of writing.

The DXY resumed its struggle following a brief reprieve yesterday which saw the greenback gain around 0.50%. The Euro and Swiss Franc appear to be the biggest gainers from the NVIDIA ban, both gaining in Asian trade.

Looking at the European session, the chances that European tech shares follow their Asian and US counterparts are high. We are already seeing weakness in index futures with the DAX trading 0.85% down at the time of writing.

Economic data releases

From a data perspective, we have Eurozone and Italian CPI (final) numbers being released this morning. Neither of these releases should have a major impact on market moves this morning with the overall tariff narrative still front and centre.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the day - DAX

From a technical standpoint, the DAX is at a key level and a critical junction for the index.

Bulls and bears are battling out for supremacy as the index hovers at the 100-day MA eyeing either a break or bounce.

Yesterday saw the DAX end the day in the green but failing to record a close above the 100-day MA.

The overnight announcement around NVIDIA and China weighed on the DAX as well with the Index opening lower today.

Currently the Index is down around 0.85% and faces significant hurdles if it is to reclaim the 22000 handle.

Keep an eye on the period-14 RSI with a break above the 50 level a potential sign that bullish momentum is in play.

A rejection of the RSI 50 level and the 100-day MA could bring support at 21000 and 20550 back into focus.

DAX 40 Index Chart, April 16, 2025

Source: TradingView.com (click to enlarge)

Support

• 21000
• 20550
• 20000

Resistance

• 21365
• 21803
• 22405

Daily Pivots: (S1) 188.76; (P) 189.18; (R1) 189.96; More...

GBP/JPY is staying in consolidation above 184.35 and intraday bias stays neutral. Risk will remain on the downside as long as 190.06 resistance holds. Below 184.35 will target 180.00 low. Nevertheless, break of 190.06 will turn bias back to the upside for stronger rebound.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 175.94 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 161.01; (P) 161.91; (R1) 162.52; More...

Range trading continues in EUR/JPY and intraday bias stays neutral. On the upside, above 164.16 will resume the rally from 154.77 to 164.89 resistance, and then 166.67. However, decisive break of 158.27 support will bring deeper decline back to 154.77 support. Overall, sideway consolidation pattern from 154.40 is still extending.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 0.8495; (P) 0.8556; (R1) 0.8587; More...

No change in EUR/GBP's outlook and intraday bias stays neutral. Consolidations from 0.8737 could extend but further rise is still expected as long as 0.8518 support holds. On the upside, break of 0.8737 will resume the larger rally from 0.8221.

In the bigger picture, down trend from 0.9267 (2022 high) should have completed at 0.8221, just ahead of 0.9201 key support (2024 low). Rise from 0.8221 is likely reversing the whole fall. Further rise should be seen to 61.8% retracement of 0.9267 to 0.8221 at 0.8867 next. This will now remain the favored case as long as 0.8472 resistance turned support holds.

Daily Pivots: (S1) 1.7673; (P) 1.7821; (R1) 1.7925; More...

Intraday bias in EUR/AUD remains neutral as consolidation from 1.8554 short term top is still extending. Downside of the pull back should be contained by 38.2% retracement of 1.5963 to 1.8854 at 1.7750. On the upside, firm break of 1.8554 will resume larger up trend.

In the bigger picture, up trend from 1.4281 (2022 low) is in progress, and in reacceleration phase as seen in W MACD. Next target is 100% projection of 1.4281 to 1.7062 from 1.5963 at 1.8744. Firm break there will pave the way to 138.2% projection at 1.9806, which is close to 1.9799 (2020 high). Outlook will remain bullish as long as 1.7417 resistance turned support holds even in case of deep pullback.

Daily Pivots: (S1) 0.9247; (P) 0.9272; (R1) 0.9314; More....

Intraday bias in EUR/CHF remains neutral and more consolidations could be seen above 0.9218. But outlook will remain bearish as long as 0.9408 resistance holds. On the downside, firm break of 0.9204 low will confirm larger down trend resumption.

In the bigger picture, rejection by long-term falling channel resistance (now at 0.9600) retains medium term bearishness. That is, down trend from 1.2004 (2018 high) is still in progress. Firm break of 0.9204 (2024 low) will confirm resumption. Next target is 100% projection of 0.9928 to 0.9204 from 0.9660 at 0.8936.

On Sunday I came back from a week-long visit to China. And what a week it was. As the days passed, tariffs went higher and higher, stock markets tanked, recovered, then dropped and then recovered again. Not totally surprising, Trump blinked and hit the pause button on tariffs on all countries except China, but even by Friday he had exempted semiconductors and electronics in a sign he had overplayed his cards. As probably the only country, China has not called Trump asking for trade talks, and this came as no surprise to most people I talked to.

Meetings were with a mix of analysts, company managers, supply chain consultants, investors and old friends that have lived there for a long time. Apart from gauging the temperature on the trade war front, I was there to get a sense of sentiment on a range of issues, such as housing, China's tech advances and what people thought about the recent efforts to boost consumption. The trip took me to Beijing, Shanghai as well as Suzhou, another major city around 90km West of Shanghai. Below I have highlighted 10 key takeaways from my discussions in close to 20 meetings and presentations.

10 key takeaways

• #1: China prepared to fight
• #2: Stronger self-confidence
• #3: Highly disruptive effects short term
• #4: Stronger stimulus, but no devaluation
• #5: No consumer boycott, and Elon Musk still a hero
• #6: Apple and Tesla last in line to be hit(?)
• #7: European companies see both risks and opportunities
• #8: Housing confidence improved, but problem not solved
• #9: China’s fast tech development to continue
• #10: Lifting consumption is a major task

Full report in PDF.

In focus today and over the holidays

Today the US March retail sales and industrial production data is due for release in the afternoon. Markets will pay extremely close attention to especially retail sales, which provides hard evidence of how consumer behaviour has evolved after Trump's tariffs began to take effect. Keep in mind that the data has been collected before the 'Liberation Day' announcements. In the evening, the Fed chair Powell is scheduled to speak at the Economic Club of Chicago at 19.30CET.

From the euro area, we receive the final March inflation data. We expect the data to confirm the flash release, leading to no market reaction as focus has shifted from inflation towards growth concerns and the trade war.

UK CPI is also being released bringing in inflation data for March. Consensus expects a drop in both headline to 2.7% y/y from 2.8% y/y, core to 3.4% y/y from 3.5% y/y and service inflation to 4.8% y/y from 5.0% y/y. If consensus estimates hold, the Bank of England should stay on track to ease monetary policy at its next meeting in May.

The Bank of Canada meeting takes place today at 15:45 CEST. Markets and consensus are leaning towards an unchanged rate decision, with markets pricing in approximately 9bp of cuts. We project that the BoC will deliver a 25bp rate cut, bringing the policy rate to 2.50%. Tariff uncertainty remains elevated and is slowly passing through to soft data, as evidenced, by the relatively downbeat Q1 Canadian business and consumer sentiment reports - supporting the case for a rate cut.

On Thursday, all eyes are on the ECB meeting, where we expect the ECB to cut the policy rate by 25bp to 2.25%, in line with market pricing and consensus. We expect the statement to repeat "monetary policy is becoming meaningfully less restrictive" and Lagarde to highlight the downside risks to growth from the trade war while abstaining from giving any clear guidance on future rate decisions. We expect Lagarde to communicate that the ECB is ready to use all instruments if financial market turmoil increases but currently do not see signs of markets not working in orderly fashion. Going forward, we expect the ECB to deliver three 25bp cuts at the upcoming meetings, bringing the deposit rate to 1.50% by September 2025.

Economic and market news

What happened overnight

In China, quarterly GDP data printed at a very strong level of 5.4% y/y over consensus expectations of 5.1% y/y. Both industrial output at 7.7% y/y and retail sales at 5.9% y/y also significantly exceeded expectations showing significant increases in domestic consumption. However, we are now in Q2 and looking ahead Chinese growth is bound to take a big hit from the massive increase in US tariffs, which is set to lead to a nosedive in exports and also GDP.

What happened yesterday

In the euro area, the ECB Bank Lending Survey pointed to continued stabilising lending conditions following gradual improvements over the past years and balance is to the dovish side. Banks noted an additional tightening of credit standards for companies while also noting a more muted demand for loans. Likewise, risk perceptions and credit quality deterioration continues to weigh on lending to firms and consumers. Credit growth remains muted and combined with the negative impact from the trade war, this should keep ECB on track to deliver further easing. Please note the survey was conducted before Liberation Day.

In Germany, optimism about the economy has waned amid trade war uncertainties. The ZEW Economic Sentiment Index fell sharply to -14.0 in April from 51.6 in March, marking the lowest since summer 2023. Despite a slight improvement in current economic conditions, they remain low at -81.2 (cons: -86.8). Trade tensions, especially with the US and China, significantly impact Germany, with the automotive industry facing a 25% tariff in the US.

In the UK, the labour market report for February/March was fairly in line with expectations with a slight tilt to the soft side. Unemployment rate remains unchanged at 4.4% as expected. Wage growth excluding bonuses was lower than expected at 5.9% for both the whole economy and the private sector with downward revisions for the previous month. Payrolls for March dropped by 78k, with a downward revision of 8k for February. This should keep the BoE set to deliver its next cut in May in line with our expectations.

In Sweden, the spring budget bill was an expected non-event, as most of its contents had already been pre-announced. The additional spending of SEK 11.5 billion is about 0.2% of GDP, but it should be added to the SEK 60 billion announced in September last year for 2025. The new proposals in the spring budget (announced back in March) centre around an extended tax cut for home renovations, which is rather narrow in terms of target group. The spring bill also comes in the context of increased defence spending, which will be formalised for the upcoming autumn bill and will, in our view, result in an upward revision of the borrowing requirement when the Debt Office presents a new borrowing forecast in May.

Equities: Global equities edged slightly higher yesterday, although the real headline was Europe outperforming the U.S. by over 1 percentage point. European markets closed broadly higher, while most major U.S. indices ended the day flat or marginally down. Cyclicals slightly outperformed defensives, and the VIX remains elevated around 30.

In the U.S. yesterday, the Dow declined by 0.4%, the S&P 500 by 0.2%, the Nasdaq by 0.1%, and the Russell 2000 rose by 0.1%.

This morning, Asian markets are trading lower, led by a sharp 2.5% drop in Hong Kong. This comes despite stronger-than-expected Chinese macro data, as industrial production, retail sales, and GDP all surpassed forecasts, with GDP coming in at 5.4% year-on-year.

Futures in both the U.S. and Europe are pointing lower this morning. U.S. tech futures are under particular pressure after Nvidia warned of a $5.5 billion write-down this quarter, citing repercussions from the ongoing trade war.

FI&FX: In an otherwise relatively quiet week so far, EUR/USD slipped below 1.13 as the broad USD paused its five-day slide and Treasury bonds climbed, after Treasury Secretary Scott Bessent downplayed the recent sell-off. Risk-on sentiment in markets provided support for European yields during yesterday's session, leading to a bearish steepening of the German curve. Positive market sentiment and equities tracking higher further supported GBP FX ahead of the release of UK CPI this morning.