UK: Labour Draws Level w/Reform In Survation Poll For First Time Since May 2025

No specific headline that we're seeing that's triggered this move in the USD, equities and Treasuries - but we do note this from BBG: "*SPACEX SHARES EXTEND DROP TO 5.4%" - bbg

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Today’s Eurostat inflation release for the Eurozone also offers more detailed calculations on German May HICP than were previously available from Destatis. As in the Eurozone-wide release, airfares and package holidays accelerated heavily and were the main upward contributors to changes in Y/Y inflation. They were however outweighed by an energy and food drag, with energy in particular - contrary to its bloc-wide reading - falling meaningfully as the government's pump price tax cuts only kicked in in May. This helped see headline HICP inflation moderate from 2.89% to 2.67% Y/Y. 

• Echoing wider Eurozone findings, German volatile travel services-related categories accelerated heavily: airfares jumped 14.30% Y/Y (-6.08 prior), adding 0.17pp in headline contribution, whilst package holidays printed at 3.52% (-3.27% prior, +0.14pp).
• Elsewhere on services in Germany, restaurants and accommodation stands out the most, falling to its lowest rate since May 2021 at 2.61% Y/Y (3.51% prior), indicating that the 12pp VAT cut on food in the sector (in effect as of January) is at least feeding through to lower inflation in the sector.
• Other services-related categories saw only minor moves this time (state-level CPI data had indicated some two-way shifts but also rather muted services effects overall after excluding for travel-related items): Healthcare was 3.67 (3.52% prior), Information and communication 1.26% (1.20% prior), recreation, sport and culture 2.42% (acceleration fully driven by package holidays,1.18% prior), education services 4.46% (4.44% prior), insurance and financial services 3.82% (4.11% prior).
• Non-energy industrial goods contributed 0.06pp more to headline in May than in April, coming in at 1.21% (vs 0.99% prior), the highest rate since August 2025. Underlying clothing and footwear (0.49% vs 0.38% prior) and furnishings, household equipment and routine household maintenance (0.05% vs -0.04% prior) both saw moderate accelerations in May.
• Food, alcohol and tobacco fell to 1.55 Y/Y, its second lowest rate since June 2021 (2.20% prior; March 2024 saw a one-off drop to 1.54%), extending a recent fall from January's 2.93%. Processed food including alcohol and tobacco was mainly behind the move, at 0.84% (1.63% prior), while unprocessed food fell to 3.68% Y/Y (3.85% prior).
• Energy inflation meanwhile fell to 5.56% (vs 8.92% prior), dragging -0.30pp from the headline Y/Y compared to April as the government's fuel tax cuts came into effect in May. The cuts will expire without a replacement at the end of June, but the recent crude retreat should mean April's Y/Y rate remains the peak in energy inflation over the near term.

The move away from session lows in crude oil has countered some of the CPI-driven rally in gilts.

• Futures last +49 at 89.30 vs. session highs of 89.47.
• Fresh upside would target the next projection level (89.62) with the short-term bullish cycle in the contract developing further over the past couple of sessions.
• Yields 2-4bp lower, post-CPI bull steepening theme holds.
• TD Securities have taken profit on their long 10-Year gilt position, noting that “given the recent outperformance both outright and cross market, we now prefer to take profit at current levels as positioning has turned increasingly long. Even though Andy Burnham’s by-election win appears to be largely priced in, we see limited value in maintaining a long bias at these levels”.
• Further forward, BoE-dated OIS follows crude away from dovish session extremes to last trade flat to 2bp less hawkish on the day, showing 29bp of tightening through year-end vs. close to ~25bp at one stage today.
• Our full preview of tomorrow’s BoE decision is available here.
• We expect a 7-2 vote split, with 2 hawkish dissenters (Pill & Greene).
• A reminder that the BoE has already de-emphasised the importance of the official labour market data (due tomorrow at 07:00 London).