MNI US OPEN - UK CPI Surprises Uncomfortable for BOE
EXECUTIVE SUMMARY
- BLOOMBERG TERMINAL OUTAGE HITS TRADERS
- UK CPI SURPRISES DRIVEN BY NARROW CATEGORIES; BOE STILL UNCOMFORTABLE
- FED SCENARIOS MAY NOT OFFER CLARITY, OFFICIALS SAY
- DALY SAYS FED HAS TIME TO BE PATIENT ON RATES
- ISRAEL PREPARING POSSIBLE STRIKE ON IRANIAN NUCLEAR FACILITIES: CNN
Figure 1: Contributions to change in UK annual CPIH inflation rate
Source: ONS
NEWS
GLOBAL (FT): Bloomberg Terminal Outage Hits Traders
Bloomberg, the markets data and media service, is facing widespread issues that are preventing finance executives from accessing live pricing and disrupting an auction of UK government debt, according to bankers and investors. Traders complained that the Bloomberg service was running with significant delays, and some complained about the lack of live pricing that they required to carry out trades. Traders said that the instant messaging service — known as IB — was still functioning as normal. Bloomberg did not immediately respond to requests for comment.
FED (MNI): Fed Scenarios May Not Offer Clarity, Officials Say
Three Federal Reserve officials said Tuesday a proposal for the FOMC to publish economic scenarios and reaction functions in a quarterly report may be confusing and difficult to accomplish practically. Former Fed Chair Ben Bernanke presented the idea at a Fed conference on its policymaking framework last week. The 19-member FOMC would have to agree on specific scenarios and potentially the probabilities attached to each, and that would be hard to do, said Fed presidents Mary Daly, Beth Hammack and Raphael Bostic in an Atlanta Fed panel in Amelia Island, Fla.
FED (MNI): Daly Says Fed Has Time to Be Patient on Rates
Federal Reserve Bank of San Francisco Mary Daly said Tuesday monetary policy is well positioned to wait for more clarity on how the economy will fare under the Trump administration's tariffs and other policy shifts. "We have time to be patient. Policy is a good place. My reaction function is to stay in a center position. We don’t have enough information to bring those confidence bands in," she told an Atlanta Fed conference in Amelia Island, Fla.
US/CHINA (BBG): Nvidia CEO Urges US to Ease AI Curbs After ‘Failure’ With China
Nvidia Corp. chief Jensen Huang blasted the “failure” of US restrictions intended to help contain China’s technological ascent, calling on the White House to lower barriers to AI chip sales before American firms cede that market to up-and-coming rivals such as Huawei Technologies Co. Huang called for policymakers to propel US AI technology by lowering export barriers aimed at curtailing the rise of a geopolitical rival. Some corners of Washington are receptive to that argument when it applies to countries like Saudi Arabia or the United Arab Emirates, which have close ties to China — but Huang has so far failed to turn the tide of restrictions that specifically target the world’s second largest economy.
US (BBG): Trump Loses Patience With SALT Demand as Tax Bill Faces Snag
President Donald Trump is growing frustrated with demands to significantly boost the cap on the state and local tax deduction, according to a senior administration official, signaling a deadlock as Republicans aim to quickly pass a giant tax-cut bill. Trump told lawmakers in a meeting on Tuesday not to let the SALT deduction or differences over social safety-net cuts impede the measure. But afterward members of warring factions told reporters they were still dug in in opposing the bill unless their changes are made.
US (BBG): Trump Says Golden Dome Will Be Operational in Three Years
President Donald Trump vowed that a “Golden Dome” missile-defense shield should be “fully operational” by the end of his term, saying it would be able to protect the US from threats including ballistic missiles, hypersonics and advanced cruise missiles. “We will truly be completing the job President Reagan started 40 years ago,” Trump said in the Oval Office, in reference to Ronald Reagan’s unfulfilled quest for a space-based missile defense system, widely known as “Star Wars.”
ISRAEL/IRAN (CNN): New Intelligence Suggests Israel Is Preparing Possible Strike On Iranian Nuclear Facilities
The US has obtained new intelligence suggesting that Israel is making preparations to strike Iranian nuclear facilities, even as the Trump administration has been pursuing a diplomatic deal with Tehran, multiple US officials familiar with the latest intelligence told CNN. Such a strike would be a brazen break with President Donald Trump, US officials said. Officials caution it’s not clear that Israeli leaders have made a final decision, and that in fact, there is deep disagreement within the US government about the likelihood that Israel will ultimately act. Whether and how Israel strikes will likely depend on what it thinks of the US negotiations with Tehran over its nuclear program.
ISRAEL (NYT): Israel’s Allies Condemn Expansion of Gaza War
Britain, France, and Canada issued a rare public reprimand of Israel, demanding that it cease its renewed military offensive in Gaza — a call that laid bare growing rifts between Israel and traditional Western allies and prompted a furious Israeli response on Tuesday. “We have always supported Israel’s right to defend Israelis against terrorism,” a joint statement by the three powerful allies said late on Monday, adding: “But this escalation is wholly disproportionate.” They condemned the expanded Israeli campaign against Hamas in Gaza and monthslong restrictions on humanitarian aid as “egregious actions” — some of the sharpest rhetoric yet seen by major Western countries long supportive of Israel.
G7/CHINA (BBG): G-7 Countries Discuss Tariffs on Low-Value Chinese Products
Canadian Finance Minister Francois-Philippe Champagne said Group of Seven countries have started discussing tariffs on oversupplied, low-value Chinese products. In a news conference on Tuesday opening a meeting of G-7 finance chiefs in Banff, Alberta, Champagne said the agenda will include talks on how the countries can coordinate their actions and tackle issues around overcapacity and non-market practices, pointing to further steps to curb oversupply from China.
UK/US (BBG): Reeves to Meet Bessent as Questions Linger Over UK-US Deal
UK Chancellor of the Exchequer Rachel Reeves will hold talks with US Treasury Secretary Scott Bessent this week, as the two countries continue to finalize the details of an agreement to cut tariffs imposed by President Donald Trump’s administration. The two are set to speak on the sidelines of the Group of Seven finance ministers’ meeting in Banff, Canada, beginning on Wednesday. It will be Reeves’s first in-person discussion with her American counterpart since Britain and the US announced the outline for a trade deal earlier this month.
PORTUGAL (MNI): President Continues Party Meetings w/Chega Set for Official Opposition
President Marcelo Rebelo de Sousa will continue meetings with party leaders today as he looks to glean information on how the most stable gov't can be put together following the 18 May legislative elections. The President of the Republic met with the leaders of the centre-right AD-PSD/CDS Coalition, centre-left Socialist Party (PS) and right-wing Chega on 20 May. Today, he will hold talks with the libertarian Liberal Initiative (IL) at 1130CET and the environmentalist LIVRE at 1700CET. PM Luis Montenegro, leader of the AD, is all but guaranteed to remain in office after his alliance won a plurality with 89 seats, up from 80 previously. Still well short of the 116 required for an overall majority in the Assembly of the Republic, he will require backing from other parties to progress his legislative agenda.
RIKSBANK (MNI): Seim Reiterates Wait-And-See Stance
Riksbank Deputy Governor Seim's speech summary offers little new relative to the May meeting minutes rhetoric: "My assessment is that monetary policy is currently well-balanced and that it is at present wise to await further information to obtain a clearer picture of the outlook for inflation and economic activity. We will change the policy rate if warranted." Ms Seim sees two main tracks as to how this will affect the Swedish economy. One is that the uncertainty makes households and businesses so cautious that they save more and invest less, which would lead to a drop in demand. Another is supply-side disruptions, where global value chains break down and shortages of inputs and consumption goods occur in different parts of the world.
ROMANIA (MNI): Defeated Presidential Candidate Seeks Annulment of Result
Defeated presidential candidate, right-winger George Simion, has alleged foreign interference in the contest, calling on the Constitutional Court to annul the ballot. Simion was defeated by liberal, pro-EU Mayor of Bucharest Nicosur Dan by 53.6% to 46.4% of the vote. Simion's call for annulment is notable given that the Court did strike out the result of the December 2024 presidential election first round, won by ultranationalist Cailin Georgescu, on the grounds that Georgescu had received funding from unknown sources (with speculation that Russia had intervened on the side of his campaign).
CHINA (MNI): China ASEAN FTA 3.0 Negotiations Concluded - MOFCOM
MNI (Beijing) China and ASEAN countries have completed negotiations on version 3.0 of their Free Trade Agreement, ending discussions which began in 2022, China’s Ministry of Commerce announced on Wednesday. Looking ahead, the two sides will actively promote the approval procedures in their respective countries and aim for a formal signing before the end of 2025, the ministry said. Version 3.0 includes nine new chapters, covering areas such as digital and green economy and will effectively promote the integration of supply chains, the ministry added.
BI (BBG): Indonesia Resumes Rate Cuts as Economy, Credit Growth Stalls
Indonesia’s central bank cut its benchmark interest rate for a second time this year as the rupiah’s recent gains allowed it to address slowing growth in the economy and bank lending. Bank Indonesia reduced the BI-Rate by 25 basis points to 5.5% on Wednesday, its lowest level since 2022. Twenty-two of 35 economists in a Bloomberg survey predicted the central bank’s move while the rest expected policymakers to stand pat as they have done since easing in January. “BI will continue to direct monetary policy to keep inflation within the target range, the rupiah in line with fundamentals, while closely monitoring room to support economic growth further in line with global and domestic dynamics,” Governor Perry Warjiyo said at the briefing.
DATA
UK DATA (MNI): CPI Surprises Driven by Narrow Categories; BOE Still Uncomfortable
- UK APR CPI +1.2% M/M, +3.5% Y/Y
- UK APR CORE CPI +1.4% M/M, +3.8% Y/Y
- UK APR SERVICES CPI +2.2% M/M, +5.4% Y/Y
- UK APR RPI +1.7% M/M, +4.5% Y/Y
Overall comparing to the BOE's forecasts, it looks as though Easter effects from air fares, package holidays and sea transportation (and if they estimated the same way as the sellside) VED are the big upside surprises. Food also surprised meaningfully to the upside. Energy was marginally softer than expected. NEIG (core goods) was actually pretty soft (1.08%Y/Y vs BOE's 1.668%Y/Y forecast) with clothing and major household appliances relatively soft. Outside of food, the parts that were a concern re employer NICs and minimum wages etc are not actually that high. So overall, the upside surprise is a lot less concerning than it originally appears. But even with all of the one-off components (and VED) the data would still have been uncomfortably high. A June cut looks off the table completely here. Quarterly cuts are probably still ok, but August is now more questionable than before this data release.
GERMANY DATA (MNI): IFO Sees Order Shortage Easing But Remaining High
"In April, 37.3 percent of companies [in Germany] reported a lack of orders, down from 40.2 percent in January", IFO reports. "The signs of easing that were seen at the start of the year thus persist. Nevertheless, the share of affected companies remains high in a long-term comparison. [...] Demand remains subdued in many places, and the current high level of uncertainty could quickly reverse the trend." Note that German exports rose 2.7% Q/Q in Q1, underpinned by strong demand from the US likely driven by tariff front-running in the country - that might have had an downward impact on any recent orders shortage perception in Germany.
SWEDEN DATA (MNI): Room for More Easing With Utilisation Still Soft
While there are tentative signs of an improvement in capacity utilisation in the industrial sector, economy-wide utilisation remains soft. This suggests there remains scope for more easing to support the economy, particularly from a fiscal/supply-side standpoint. Swedish industrial capacity utilisation inched up to 88.0% in Q1 (vs 87.5% prior), but remains below the 2000-2019 average of 88.4%. The proportion of respondents citing insufficient demand as a reason for below-full capacity utilisation ticked up to 55.1% (vs 54.4% prior). Meanwhile, the proportion citing production disruptions rose to 26.1% (vs 23.2% prior).
JAPAN DATA (MNI): Japan April Exports Rise; Car Exports Drop
- JAPAN POSTS JPY115.8 BLN TRADE DEFICIT IN APRIL
- JAPAN APRIL EXPORTS +2.0% Y/Y; MARCH +4.0%
Japan’s exports rose for a seventh consecutive month in April, climbing 2.0% year-on-year, although the pace slowed from March’s 4.0% increase, data from the Ministry of Finance showed Wednesday. The rise was supported by continued strength in shipments of semiconductors, which grew 13.2%, though automobile exports declined 5.8%, reversing from a 7.1% increase the previous month. Imports declined 2.2% in April, the first drop in two months, following a 1.8% rise in March, driving a trade deficit of JPY115.8 billion, the first since January, after posting a JPY559.4 billion surplus in March.
AUSTRALIA DATA (MNI): Westpac Lead Index Pressured by Global Events
The April Westpac leading indicator was flat on the month but after falling 0.15% in March, the annualised 6-month rate eased to 0.19%, the lowest since October. This latter measure leads detrended growth by three to nine months and so suggests activity could slow in H2 but it is indicating that H1 should be stronger than late 2024. Westpac observes that the weaker index reflects recent global developments but currently through markets and sentiment. The RBA revised down its 2025 growth outlook in its May forecasts with Q4 2025 now expected to be 0.3pp lower than February at 2.1% due to a softer consumer recovery and heightened global uncertainty. These were significant reasons behind yesterday's 25bp rate cut.
NEW ZEALAND DATA (MNI): Business Inflation Expectations Broadly Higher
The RBNZ has released its first official business expectations survey for Q2 2025 after trialling it over H2 2024. It found that inflation expectations rose across time horizons from 1-year to 10-years. Data released last week also showed an increase for Q2. The RBNZ decision is announced on May 28 and it is likely to cut rates 25bp but rising inflation expectations may make its tone more cautious.
NEW ZEALAND DATA (MNI): Strong Primary Exports Boost Trade Surplus
NZ posted its third consecutive monthly merchandise trade surplus in April at $1426.04mn up from $794.43 to drive a further narrowing in the YTD deficit to $4812mn from $6250mn, the lowest since October 2021. The improvement has been the result of export growth outpacing imports with shipments to China, the US and Europe particularly strong.
FOREX: CPI Support for GBP Proves Short-Lived
- UK CPI data came in ahead of expectations, with tax changes for transport and the timing of Easter driving price gains well ahead of both market and BoE expectations. GBP/USD rallied in response, with the pair hitting a new multi-year high at 1.3469 in response. These gains were short-lived, however, despite a further contraction of rate cut pricing across UK OIS markets.
- We noted yesterday that GBP/USD has struggled to maintain gains above the 1.34 handle on several occasions already this year, as well as in 2024, 2019 and 2020. Spot gains today saw a brief print at 1.3469, but markets have already reversed ~60 pips off the high to contain the overall bullish breakout. The keeps focus on the bearish tweezer candle formation printed on April 28/29, which could mark a near-term top. 1.3342 undercuts as first support, ahead of the more meaningful 50-day EMA at 1.3137. A move through here would challenge the near-term bullish trend narrative.
- NOK is the strongest currency in G10, rallying against all others and pressing EUR/NOK to test 11.50 for a new multi-day low. Meanwhile the USD is backtracking, with the USD Index helping support EUR/USD north of 1.1300 having broken above the handle during Asia-Pac trade.
- No tier one data is set for Wednesday release, and the handful of Fed speakers due are unlikely to rock the boat given the sensitivities around the passage of the US' Big Beautiful Bill, which continues to see several hurdles around SALT allowances.
EGBS: Bund Futures Through Support; Core FI Weakness Broad-Based
Bearish momentum remains intact with Bunds through previously identified support at 129.71, currently -61 ticks at 129.63. Key short-term support has been defined at 129.13, the May 15 low.
- Although the UK April CPI report was stronger-than-expected, Bund weakness gathered momentum from the European cash open, without an obvious headline driver. There hasn’t been an obvious fundamental driver of the wider core FI weakness.
- German yields are 3-6bps higher today, with 10s underperforming in the lead-up to today’s E4bln 10-year Bund auction (results were published at 1030BST). Cover ratios were much healthier than the previous outing in April.
- European equity sentiment has been soft, prompting a widening of 10-year peripheral spreads to Bunds. The BTP/Bund spread has moved back away from the 100bps handle, currently at 102bps.
- Today’s regional data calendar has been light, but there are several ECB speakers scheduled. At an MNI event this morning, Kazak’s said that “If the current baseline holds, we will soon reach the terminal rate”. He has previously suggested that a June cut is quite probable.
- Centeno, Lane and Escriva are scheduled later, with Lane speaking on “Negative interest rates and the impact of monetary policy”.
- Focus remains on tomorrow’s May flash PMIs and Friday’s Q1 negotiated wages data.
GILTS: Curve Steepens, Next Support Tested in Futures
Gilts remain under pressure with bearish momentum in wider core global FI markets adding to downside impetus that followed the firmer than expected domestic CPI data.
- As we have noted elsewhere, while an element of an Easter effect was no doubt present, the CPI readings, particularly services inflation, were still firm, even when adjusting for Easter.
- Futures test next support at the April 11 low (90.47), a break would expose key support at the April 9 low (89.99).
- Yields 5-8bp higher, curve steeper.
- 2-Year yields move above the April 10 high (4.078%), peaking at 4.098%. The next upside level of note comes in at the downtrend line drawn off the January high (4.119% today).
- April 9/10 highs are unchallenged further out the curve.
- BoE-dated OIS shows 0bp of easing for next month, 11bp of cuts through August, 16bp through September, 28bp through November and 35bp through year-end.
- Contracts are little changed to 5bp more hawkish on the day.
- December MPC implied rates sit at the most hawkish level seen since April 10
- SONIA futures are 0.25-6.2bp lower.
- SFIZ5 filled the opening gap higher from April 3 before bouncing.
- Implied terminal rate pricing (proxied by SFIU6 at present) moves to 3.720% last.
- The DMO has noted that due to the ongoing market-wide Bloomberg system issues, the bidding window for this morning's auction of the 4% 2031 gilt is being extended. They expect the close time of the auction bidding window to be 11:30am, subject to Bloomberg systems issues being resolved.
- Little of note on the UK calendar for the remainder of the day outside of the auction, which will leave focus on macro inputs and continued digestion of the CPI data.
EQUITIES: Bullish Trend Condition in E-Mini S&P Remains Intact
- A bullish theme in Eurostoxx 50 futures remains intact and price is trading at its recent highs. The contract is extending the recent breach of 5263.01, 76.4% of the Mar 3 - Apr 7 bear leg, and maintains the sequence of higher highs and higher lows. Sights are on 5516.00, the Mar 3 high and the key bull trigger. Key support to watch lies at 5201.23, the 50-day EMA. Clearance of this level would signal a possible reversal.
- A bullish trend condition in S&P E-Minis remains intact and the contract is trading closer to its recent highs. An important resistance at 5837.25, the Mar 25 high and a bull trigger, has been cleared. This has strengthened the current bullish theme, and paves the way for a continuation near-term. Sights are on the 6000.00 handle next. Initial firm support to watch lies at 5703.54, the 50-day EMA.
COMMODITIES: WTI Futures Trade to Fresh Short-Term Cycle High
- WTI futures have traded to a fresh short-term cycle high today and maintain a bullish theme. However, the recovery since Apr 9, still appears corrective. Key resistance to watch is $62.87, the 50-day EMA. It has been pierced, a clear break of it would highlight a stronger reversal. This would open $65.82, the Apr 4 high. For bears a reversal lower would refocus attention on $54.33, the Apr 9 low and bear trigger.
- Gold has recovered from its recent lows and is trading higher today. The climb signals the end of the corrective phase between Apr 22 - May 15. Medium-term trend signals remain bullish - moving average studies are in a bull-mode position highlighting a dominant uptrend. A continuation would open $3435 next, the May 7 high. Key support and the bear trigger has been defined at $3121.0, the May 15 low.
| Date | GMT/Local | Impact | Country | Event |
| 21/05/2025 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 21/05/2025 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 21/05/2025 | 1600/1800 |  EU | ECB's Lane at Monpol Panel Discussion | |
| 21/05/2025 | 1615/1215 | US | Richmond Fed's Tom Barkin, Fed Gov. Michelle Bowman | |
| 21/05/2025 | 1620/1220 | US | Fed Governor Michelle Bowman | |
| 21/05/2025 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 22/05/2025 | 2300/0900 | *** |  AU | Judo Bank Flash Australia PMI |
| 22/05/2025 | 2350/0850 | * |  JP | Machinery orders |
| 22/05/2025 | 0030/0930 | ** | JP | Jibun Bank Flash Japan PMI |
| 22/05/2025 | 0600/0700 | *** |  GB | Public Sector Finances |
| 22/05/2025 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 22/05/2025 | 0715/0915 | ** | FR | S&P Global Services PMI (p) |
| 22/05/2025 | 0715/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 22/05/2025 | 0730/0930 | ** |  DE | S&P Global Services PMI (p) |
| 22/05/2025 | 0730/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 22/05/2025 | 0800/1000 | *** | DE | IFO Business Climate Index |
| 22/05/2025 | 0800/1000 | ** | EU | S&P Global Services PMI (p) |
| 22/05/2025 | 0800/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 22/05/2025 | 0800/1000 | ** | EU | S&P Global Composite PMI (p) |
| 22/05/2025 | 0830/0930 | *** | GB | S&P Global Manufacturing PMI flash |
| 22/05/2025 | 0830/0930 | *** | GB | S&P Global Services PMI flash |
| 22/05/2025 | 0830/0930 | *** | GB | S&P Global Composite PMI flash |
| 22/05/2025 | 1000/1100 | ** | GB | CBI Industrial Trends |
| 22/05/2025 | 1050/1150 | GB | BOE's Breeden On Climate Panel | |
| 22/05/2025 | 1100/1200 | GB | BOE's Dhingra On UK Productivity Panel | |
| 22/05/2025 | 1130/1330 | EU | ECB April Minutes Released | |
| 22/05/2025 | 1200/0800 | US | Richmond Fed's Tom Barkin | |
| 22/05/2025 | 1230/0830 | *** | US | Jobless Claims |
| 22/05/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 22/05/2025 | 1230/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 22/05/2025 | 1230/1330 | GB | BOE's Pill At MonPol Conference (Text 16:30BST) | |
| 22/05/2025 | 1300/1500 | ** |  BE | BNB Business Confidence |
| 22/05/2025 | 1345/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 22/05/2025 | 1345/0945 | *** | US | S&P Global Services Index (flash) |
| 22/05/2025 | 1400/1000 | *** | US | NAR existing home sales |
| 22/05/2025 | 1400/1000 | * | US | Services Revenues |
| 22/05/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 22/05/2025 | 1500/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 22/05/2025 | 1500/1700 | EU | ECB's Elderson Dinner Speech at Biodiversity Day | |
| 22/05/2025 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 22/05/2025 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 22/05/2025 | 1535/1735 | EU | ECB's de Guindos Speech in Madrid | |
| 22/05/2025 | 1700/1300 | ** | US | US Treasury Auction Result for TIPS 10 Year Note |
| 22/05/2025 | 1800/1400 | US | New York Fed's John Williams | |
| 22/05/2025 | 1900/1500 | US | New York Fed's Roberto Perli |
