UK DATA: Food, core goods higher than exp, services a little lower - as MNI exp
- Food added 0.10ppt to headline CPI and core goods contributed around 0.14ppt on our quick calculations.
- The core goods impact means that the BOE was surprised 0.28ppt to the downside versus 0.59ppt to the downside last month. There wsa an increase in furniture and major household appliances costs with broad based increased across the rest of the category. This suggests an unwind of some Easter-related discounting in the category. We had noted the potential for upside to core goods prices in our preview.
- Food and non-alcoholic beverages surprised the BOE by 0.94ppt to the upside (0.47ppt upside in April). This may potentially be partially due to more passthrough of the national living / minimum wages than the BOE expected. We also saw upside risks to this category in our preview.
- Services were pulled lower by 0.13ppt from air fares and 0.04ppt from boat fares as Easter impacts unwound. Package holidays contributed 0.01ppt positively but there were also downside contributions from train fares, cultural services and telephone services (the latter expected). We also got the downside surprise to services we expected, around 0.1ppt to consensus but only 0.05ppt to the BOE.
- Overall, we think the MPC will view this as broadly in line with expectations (headline 0.00ppt surprise to BOE) but be concerned about the continued rise in food prices.
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EURJPY TECHS: Monitoring Support At The 50-Day EMA
- RES 4: 166.69 High Oct 31 2024 and a key resistance
- RES 3: 166.10 High Nov 6
- RES 2: 165.21/43 High May 13 / High Nov 8 2024
- RES 1: 164.07 High May 15
- PRICE: 162.50 @ 07:14 GMT May 19
- SUP 1: 162.23/15 50-day EMA / Intraday low
- SUP 2: 161.60 Low May 6
- SUP 3: 160.99 Low Apr 22
- SUP 4: 159.48 Low Apr 9
EURJPY maintains a bearish tone following the pullback from its recent high. The move down is for now, considered corrective. However, the cross is testing a key support at 162.23, the 50-day EMA. A break of this level would undermine a bearish theme and signal scope for a deeper retracement. For bulls, a resumption of gains would refocus attention on key resistance and the bull trigger at 165.21, the May 13 high.
GILT TECHS: (M5) Resistance Remains Intact
- RES 4: 93.59 High May 8
- RES 3: 93.00 Round number resistance
- RES 2: 92.28 20-day EMA
- RES 1: 92.03 High May 16
- PRICE: 91.73 @ Close May 16
- SUP 1: 90.96 Low May 15 and the bear trigger
- SUP 2: 90.92 76.4% retracement of the Apr 9 - May 2 rally
- SUP 3: 90.47 Low Apr 11
- SUP 4: 89.99 Low Apr 9 and a key support
Gilt futures traded sharply lower last Wednesday, extending the current bear cycle. The impulsive sell-off strengthens a bearish theme. The move down exposes 90.92, 76.4% of the Apr 9 - May 2 rally. A break of this level would strengthen the bearish condition and open 90.47, the Apr 11 low. Note that the strong rally from last Thursday’s low does ease bearish pressure. Resistance to watch is at 92.28, the 20-day EMA. A break would be bullish.
RATINGS: U.S. Lost Aaa Status at Moody’s on Friday, Some Tweaks Elsewhere
Sovereign rating reviews of note from after hours on Friday include:
- Fitch affirmed Greece at BBB-, Outlook revised to Positive
- Fitch affirmed Slovakia at A-; Outlook Stable
- Moody's downgraded the United States of America to Aa1 from Aaa, outlook changed to stable
- S&P affirmed South Africa at BB-; Outlook Positive
- Morningstar DBRS confirmed the United Kingdom at AA, Stable Trend
- Scope upgraded Slovenia to A+, Outlook Stable
