Summary:
- US inflation rises to 6-year high. CPI Y/Y 2.8%
- USD fails to gain with USDSEK potentially vulnerable to more downside
- US markets edging higher but some red seen in Europe
- GBP keeps gains despite slower wage growth
- Trump-Kim summit sees muted reaction
The most recent inflation data from the US has shown a small increase although the market reaction has been fairly muted with traders possibly biding their time ahead of tomorrow’s Fed rate decision. Turning to the data itself a rise of 2.8% in Y/Y terms from 2.5% previously is a pretty large jump; although this was largely expected due to last May’s M/M change being an unusual drop of 0.1% which has now been replaced by a 0.2% gain for this year.
Despite the rise in CPI, the US dollar is actually a little lower on the day and there are a few reasons why USDSEK may be attractive for those looking to shorts the buck. SEK has had a pretty large decline of more than 6% against the USD so far this year and the fundamental outlook suggests that, at least in the short term, this could be a little overdone.
The US500 reacted positively to the CPI release and remains close to a 3-month high heading into some major events in the next 48 hours.Some comments from hedge fund manager Paul Tudor Jones are making the headlines this afternoon, with the Billionaire investor predicting a possible blow off top for stocks later this year.
The UK economy saw slower than previously wage growth in three months ended in April suggesting there could be still some spare capacity left. On the flip side, employment momentum remained robust, and the unemployment rate stayed at its lowest point since 1975. The pound made a brief decline, but it was able to erase it afterwards. A parliamentary vote on the Brexit withdrawal bill is scheduled to happen shortly and this could have a major impact on sterling.
We saw a jolt to the upside across European equities immediately after the opening. Nevertheless, buoyancy has disappeared to some extent since then even as the Trump-Kim summit ended with some promising results. European bourses have ended their cash session mixed with the DE30 in the red.