CZK: Koruna Edges Lower Despite CNB Gov's Hawkish Message

RXM5/U5 40k trades at 20.5.

• The USD is undergoing a mild corrective bounce early Tuesday, reversing a small part of the Monday underperformance as catalysts for a further phase of USD weakness dry up somewhat. The market bias remains wholly negative dollars, with the looming background threat of trade headlines still working in favour of the short side. That said, there remain short-term drivers of a potential relief rally for the USD; particularly this Friday's NFP print, at which the Fed will be watching carefully for further signs of a deterioration of the labour market. For now, the USD is the strongest currency in G10 on the day.
• Eurozone inflation data came in on the low side of expectations, with a particular step lower for services pricing prompting headline inflation to slip below the ECB's target and further justify an ECB rate cut at this Thursday's meeting. EUR/GBP edged lower in response, putting the cross to 0.8439, but still clear of the Monday lows. These remain the first downside level of note at 0.8424.
• AUD sold off on the most recent RBA rate decision, and the currency is weaker again today following the minutes of the meeting at which the bank discussed the option of a 50bps cut to the benchmark rate, with members increasingly concerned over the prospects for growth from Trump's trade tariff policies. AUD/USD found support just ahead of the 0.6450 level, but is once again pressuring that mark into early NY hours.
• JOLTS jobs data is the data highlight Tuesday, with markets expecting job openings to ebb again toward multi-year lows. Speakers set for Tuesday include Fed's Goolsbee, Cook & Logan as well as members of the BoE MPC testifying in front of UK lawmakers. 

Eurozone May flash HICP Y/Y inflation came in at 1.92%, 8 hundredths below the rounded consensus of 2.0% (vs 2.17% April) but inline with MNI's tracking estimate. On a monthly basis, Eurozone inflation came in at -0.03% (0.0% cons, 0.57% April). Services inflation stands out, seeing its lowest Y/Y rate since March 2022.

• Core HICP also printed below consensus, at 2.29% Y/Y and -0.01% M/M (2.4% cons; Apr 2.75% Y/Y, 1.02% M/M).
• Looking at the individual categories:
  • Services inflation notably decelerated to 3.24% (3.98% Apr) - this means the category more than reversed April's unexpectedly firm print, now coming in 22 hundredths softer than March (3.46% Y/Y) and below May consensus (around 3.5% ahead of the national-level data). National-level data suggested that Easter Effect unwinds were at play here to some extent, and the Netherlands might have an outsized negative drag this time.
  • Its therefore quite hard to interpret at this stage what the low services Y/Y print means re underlying softening - the final data will give more indication here.
  • Energy inflation was little changed at -3.57% Y/Y (-3.56% Apr), a little softer than consensus which we saw at -3.4% Y/Y.
  • Non-energy industrial goods, as expected, also was stable in May, at 0.63% Y/Y (0.57% Apr). Stronger Chinese exports into Europe, prompted by firmer US tariff barriers, may start
    to weigh on durable goods prices later in Q2.
  • Food, alcohol and tobacco inflation ticked up and was firmer than expected - the category printed 3.25% Y/Y (2.97% April, consensus was for 3.1%).
• Looking at the national-level prints, headline HICP inflation accelerated in 6 countries in May vs April despite the overall decrease in headline.