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The pound got a major beat-down after the U.K.’s CPI report failed to meet expectations. The euro, meanwhile, was kicked lower after the latest batch of PMI reports failed to impress. As for the safe-haven yen, it was riding high because of the risk-off vibes. Although the safe-haven Swissy also got a piece of the action.

  • French flash manufacturing PMI: 55.1 vs. 53.7 expected vs. 53.8 previous
  • French flash services PMI: 54.3 vs. 57.2 expected, 57.4 previous
  • German flash manufacturing PMI: 5.8 vs. 57.9 expected, 58.1 previous
  • German flash services PMI: 52.1 vs. 53.0 expected, 53.0 previous
  • Euro Zone flash manufacturing PMI: 55.5 vs. 56.1 expected, 56.2 previous
  • Euro Zone flash services PMI: 53.9 vs. steady at 54.7 expected
  • U.K. CPI m/m: 0.4% vs. 0.5% expected, 0.1% previous
  • U.K. CPI y/y: 2.4% vs. steady at 2.5% expected
  • Core U.K. CPI y/y: 2.1% vs. 2.2% expected, 2.3% previous
  • HPI in the U.K. y/y: 4.4% vs. 4.8% expected, 4.7% previous
  • U.K. PPI input m/m: 0.4% vs. 1.0% expected, 0.1% previous
  • U.K. PPI output m/m: 0.3% as expected, same as previous
  • FOMC meeting minutes will be released later

Major Events/Reports:

Italy-related update

According to a Reuters report, Italian President Sergio Mattarella and Giuseppe Conte will supposedly meet later today at 3:50 pm GMT.

And if you don’t know what that’s all about, then you may want to read Forex Gump’s Quick Primer On Italy’s Political Situation.

The gist of it, though, is that the 5-Star Movement and the League named Giuseppe Conte as their top pick to be the next Italian Prime Minister.

And while Mattarella has already consulted with both parties, he refrained from appointing Conte as the PM.

And if the alleged meeting later is the real deal, then there’s a chance that Mattarella may appoint Conte as the PM and give him the mandate to form the new coalition government. There’s no guarantee that Matterella will do that, though.

U.K. CPI report disappoints

The Office for National Statistics (ONS) released the U.K.’s April CPI report earlier in the day.

And unfortunately, the CPI report revealed that CPI only increased by 0.4% month-on-month, missing expectations for a stronger 0.5% rise.

Year-on-year, CPI rose by 2.4%, which is rather disappointing since the market was expecting that annual CPI would match the previous month’s +2.5% pace.

Interestingly enough, the +2.4% annual reading actually meets the BOE’s own forecast that CPI will increase by 2.4% in April, as reported in the BOE’s May Inflation Report.

The BOE is therefore still likely on track to hike the Bank Rate sometime this year. That didn’t stop pound bears from beating up the pound, though.

Euro Zone PMI reports disappoint

Markit released the latest batch of PMI reports for Germany, France, and the Euro Zone as a whole.

And sadly (for euro bulls), most of them failed to meet the market’s expectations.

Looking only at the PMI report for the Euro Zone as a whole, manufacturing PMI dropped from 56.2 to 55.5. The market was only expecting a soft tumble to 56.1. Also, the 55.5 reading is an 18-month low. Ouch!

The Euro Zone’s flash services PMI reading was also pretty bad since it slumped to 53.9 instead of holding steady at 54.7 as expected. By the way, the 53.9 reading is a 16-month low. Double ouch!

According to commentary from Markit, the weaker readings were due to much weaker output and new orders growth. Employment was more mixed since the service sector saw a decline in payroll numbers while the manufacturing sector reported a rise in employment.

Prices also painted a mixed picture since “Input cost inflation accelerated to a three-month high,” with “signs of rising wage pressures in some countries.”

However, “average selling prices for goods and services rose at the slowest rate since last September, with companies often reporting difficulties in hiking prices amid weak final demand.”

Intense risk aversion in Europe

Europe was hit by an intense wave of risk aversion that sent the major European equity indices broadly lower during the morning London session.

And market analysts say that the intense risk-off vibes were due to renewed trade war fears, the Euro Zone’s disappointing PMI reports, the economic crisis in Turkey, and political uncertainty in Italy.

  • The pan-European FTSEurofirst 300 was down by 1.11% to 1,539.81
  • Germany’s DAX was down by 1.59% to 12,961.12
  • The blue-chip Euro Stoxx 50 was down by 1.66% to 3,535.15

U.S. equity futures were also down in the dumps, which is a sign that risk aversion may carry over into the upcoming U.S. session.

  • S&P 500 futures were down by 0.65% to 2,708.25
  • Nasdaq futures were down by 0.97% to 6,842.00

Global bond yields slump

Another sign of the risk-off vibes in Europe was the intense demand for bonds that caused global bond yields to slump.

  • German 10-year bond yield down by 9.63% to 0.507%
  • French 10-year bond yield down by 1.43% to 0.821%
  • U.K. 10-year bond yield down by 4.53% to 1.454%
  • U.S. 10-year bond yield down by 1.56% to 3.017%
  • Canadian 10-year bond yield down by 2.50% to 2.453%

Major Market Mover(s):


The pound was already feeling some bearish pressure during the earlier Asian session.

However, that selling pressure intensified and became more broad-based when the U.K.’s CPI report failed to meet the market’s expectations (but met the BOE’s expectations), so much so that the pound found itself at the bottom of the forex heap, not just of the session, but of the day (so far) as well.

GBP/USD was down by 82 pips (-0.62%) to 1.3313, GBP/JPY was down by 170 pips (-1.15%) to 146.08, GBP/CHF was down by 92 pips (-0.70%) to 1.3186


The euro was the second worst-performing currency of the session. And that was apparently due to the disappointing PMI reports. Although market analysts also cited political uncertainty in Italy as another reason for the euro’s weakness.

EUR/USD was down by 64 pips (-0.55%) to 1.1700, EUR/JPY was down by 140 pips (-1.08%) to 128.36, EUR/CHF was down by 67 pips (-0.58%) to 1.1589


The safe-havens yen and Swissy were enjoying the risk-off vibes during the morning London session. And between the two, it looks like the yen was the safe-haven of choice since the yen was the once currency to rule them all, likely because the yen got an extra boost from the slump in global bond yields. Well, either that or the SNB was sneakily weakening the Swissy again.

USD/JPY was down by 59 pips (-0.53%) to 109.72, CAD/JPY was down by 68 pips (-0.80%) to 85.04, AUD/JPY was down by 45 pips (-0.55%) to 82.63

USD/CHF was down by 16 pips (-0.17%) to 0.9905, AUD/CHF was down by 8 pips (-0.11%) to 0.7459, CAD/CHF was down by 26 pips (-0.34%) to 0.7676

Watch Out For:

  • 1:45 pm GMT: Markit’s U.S. flash manufacturing PMI (56.5 expected, same 56.5 previous)
  • 1:45 pm GMT: Markit’s U.S. flash services PMI (54.9 expected vs. 54.6 previous)
  • 2:00 pm GMT: Euro Zone consumer confidence (0.5 expected vs. 0.4 previous)
  • 2:00 pm GMT: U.S. new home sales (679K expected, 694K previous)
  • 2:30 pm GMT: U.S. crude oil inventories (-2.5M expected, -1.4M previous)
  • 3:50 pm GMT: Italian President Mattarella will meet with potential PM  Conte
  • 6:00 pm GMT: The minutes of the most recent FOMC meeting will be released