ING Predicts U.K. Services Inflation to Ease, BoE Rate Cuts on Track

Economic

Forex

Summary:

ING on Wednesday provided an analysis of the latest U.K. inflation data, which indicated a significant rise in...

ING on Wednesday provided an analysis of the latest U.K. inflation data, which indicated a significant rise in services inflation, driven largely by an increase in road tax and the timing of Easter.

According to ING, this inflationary spike is expected to recede, with services inflation likely to fall back from April’s 5.4% figure to around 4.5% this summer. This forecast aligns with the Bank of England’s (BoE) trajectory for quarterly rate cuts extending into 2026.

The recent inflation data showed a jump from 4.7% to 5.4% in services inflation during April, a larger increase than anticipated by both ING and the BoE. However, ING’s analysis suggests that this rise is less concerning upon closer examination.

They estimate that half of the increase is attributable to the change in road tax, which will persist for a year before dropping from the annual comparison. The BoE is expected to overlook this change, as it typically does with tax adjustments.

The remainder of the inflation surge is largely due to higher airfares and package holiday costs, influenced by Easter’s timing. Last year, Easter occurred in March, affecting the annual rate comparison.

This year, the data was collected just before Good Friday, amplifying the monthly increase in plane ticket prices by 28%. These effects are predicted to diminish in the coming months.

Further analysis by ING highlights disinflation in several other service sectors in April, including restaurants, medical care, and rents. The contribution of rent to services inflation, currently at a full percentage point, is expected to halve by early next year due to a lower government cap on social housing costs.

Surveys also indicate a decline in pricing power, supporting ING’s expectation that services inflation will decrease to the 4.5% region this summer and continue to lower by 2026.

Despite inflation levels remaining above the BoE’s comfort zone, ING maintains that policymakers are unlikely to accelerate the easing process in 2023.

However, they anticipate a rate cut in August, with the BoE continuing its quarterly pace of rate reductions through the year and into 2026.

Source: Investing

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Glendon

Forex

Economic

The GBPUSD moved higher to a new high going back to 2022 after hotter than expected CPI data, but has reversed lower. The pair is back below the 2024 hgh at 1.3433, and the 2025 high from April at 1.3441 after spiking to 1.34695. Staying below those levels will keep the sellers in play. Move above and we should resume the upside momentum to new highs.

The EUR and JPY are also higher vs the USD (the USD is lower) to start the US trading day.

Regarding the UK inflation, it surprised to the upside in April, with headline CPI rising by 3.5% year-over-year (vs 3.3% expected, prior 2.6%). Core CPI climbed to 3.8% (vs 3.6% expected), and services inflation surged to 5.4% (vs 4.8% expected), pointing to persistent underlying pressures. The stronger-than-expected data significantly dents hopes for aggressive rate cuts from the Bank of England, with markets now pricing in just one 25 bp cut by year-end—if that. The report reinforces the view that inflation, not weak growth, is the dominant risk facing central banks, aligning with similar concerns for the ECB and the Fed.

ECB's Centeno said the interest rate to prevent inflation from falling under 2%, may have to come below the neutral rate between 1.5% and 2.0%

Late yesterday, Cleveland Fed President Beth Hammack spoke and expressed concern over recent sentiment data, noting it reflects unease about the economic outlook. She emphasized that the Fed faces a tough balancing act if both inflation and unemployment become problematic. Hammack stressed the importance of monitoring how business decisions are affected by trade policies, and for now, believes the Fed’s best course is to “sit on its hands” and evaluate data closely while engaging with communities. She added that inflation expectations remain well-anchored, but any shift in those expectations could prompt the Fed to take action. "Uncertainty" is the key theme for Fed officials. The undercurrent is the fear of inflation but the economy matters too. So eyes are pealed to the data.

US stocks are lower with the futures implying:

Dow Industrial average futures are down -325 points after falling -114.83 points or -0.27% yesterdayS&P index futures are implying a decline of -35 points after yesterday's -23.14 points or -0.39% declineNasdaq futures are implying a decline of -131 points after falling -72.75 points or -0.38%

In the European markets, the major indices are lower at the start of the US session:

German Dax, -0.21%France's CAC, -0.66%UK FTSE 100, -0.02%Spain's Ibex, -0.36%Italy's FTSE MIB, -0.24%

In the US debt market, yields higher with the yield curve steepening. The two-year yield to his back of 4%. The 30-year yield is back above 5%:

2-year yield 4.002%, +3.2 basis points5-year yield 4.119%, +5.2 basis points10-year yield 4.544%, +6.4 basis points30-year yield 5.035%, +6.8 basis points

In other markets:

Crude oil up $0.65 at $62.86Gold is up $20.44 or 0.62% at $3310.34Bitcoin is trading down $353 at $106,502. Intraday high price reached $108,035

Source: ForexLive

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Adam

Economic

Market Overview

U.S. equity futures are under modest pressure early Wednesday, giving back some gains after a sharp recovery run. S&P 500 futures are off 0.3%, with Nasdaq 100 and Dow futures showing similar declines. Tuesday’s session marked a broad pullback as the S&P 500 snapped a six-day winning streak, while the Dow and Nasdaq ended three-day and two-day streaks, respectively.

Despite the retreat, all major indexes remain firmly above their April 2 levels—when tariffs were announced—and are in positive territory for the year. That backdrop reflects a rally driven by easing trade tensions and resilient earnings, but traders are watching for signs of fatigue and renewed volatility amid lingering political and fiscal concerns in Washington.

Notable Earnings

Before the Open:

Target (TGT) is in focus ahead of its Q1 report. Analysts expect EPS of $1.70 on $24.4B in revenue, both down year over year. Management has previously warned of margin pressures from consumer softness and tariffs. Oppenheimer sees potential downside risk to full-year guidance but remains long-term constructive.

Other key names reporting include Lowe’s (LOW) with a consensus EPS of $2.89, TJX (TJX) at $0.91, Medtronic (MDT) at $1.58, and Canada Goose (GOOS) at $0.16.

After the Close:

Snowflake (SNOW) delivers fiscal Q1 results following a 40% rally since April. Expectations are for EPS of $0.21 on $1.01B in revenue. Morgan Stanley notes stable growth with some March softness in bookings, but overall deal volume remains solid.

Other notable reports post-close include Zoom (ZM) with EPS seen at $1.31, Urban Outfitters (URBN) at $0.84, and LiveRamp (RAMP) at $0.28.

Commodities, Crypto, and Bonds

Gold is trading at a one-week high, with spot prices up 0.2% to $3,293.98/oz, supported by a weaker dollar and heightened fiscal uncertainty. U.S. futures are also higher. The dollar has declined on skepticism surrounding a proposed tax bill and a Moody’s downgrade, making gold more attractive. Technical commentary points to continued upside unless new trade optimism reverses sentiment.

Central Bank Activity

St. Louis Fed President Alberto Musalem suggested on Tuesday that easing trade tensions could help inflation trend toward the Fed’s 2% target without disrupting labor markets. Traders are pricing in rate cuts starting in October, with roughly 54 bps of easing by year-end 2025.

Technical Outlook

All three indexes are consolidating just below recent highs following extended rallies.

The Day Ahead: Markets Eye Target and Snowflake Earnings Today After Rally Pauses_1

Daily E-mini S&P 500 Index

The S&P 500 hit resistance near 5993.50, just above its 200-day SMA at 5883.95, with short-term support at 5596.00. The Nasdaq 100 is pulling back after testing 21529.75, while the Dow faces pressure beneath resistance at 42763, also testing the 200-day SMA. Any break below these levels could trigger a deeper retracement.

Outlook

Markets are cooling off after a strong multi-week advance, with attention turning to earnings and Washington headlines. With no key economic data on deck, traders will focus on corporate results and political developments. Risk lies in disappointing retail earnings or renewed fiscal gridlock.

Source: fxempire

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Gerik

Economic

China–U.S. Trade War

Surge in Shipping Volumes as Exporters Rush to Beat Deadline

Following the announcement of a 90-day tariff ceasefire between the U.S. and China in mid-May, Chinese exporters have moved at breakneck speed to capitalize on the brief reprieve. In the week starting May 12, container bookings from China to the U.S. more than doubled to 228,000 TEUs (twenty-foot equivalent units), according to data from container tracker Vizion and Dun & Bradstreet.

This sudden spike in demand has led to a sharp rise in shipping costs. The freight rate for the Shanghai–Los Angeles route jumped 16% to $3,136 per 40-foot container by May 15—the steepest weekly increase of 2025 so far—according to Drewry’s World Container Index. Global shipping rates have also recorded their highest weekly gain since the beginning of the year.

Factories Shift into Overdrive to Meet Accelerated Deadlines

In manufacturing hubs like Guangdong, factories are running 24/7 to meet revived U.S. orders that were previously postponed due to tariff uncertainty. One such facility, supplying major clients including Royal Philips NV and Walmart, reported a rush of orders for home appliances such as coffee machines, ovens, and humidifiers.

“Every minute counts in these 90 days,” said Chen Lei, a plant manager. “We’re running the machines nonstop—there’s simply no time to spare for delays in either production or shipping.”

Air Cargo and Ocean Shipping Both See Demand Booms

The shipping surge isn’t confined to maritime transport. China’s international air cargo volume also jumped nearly 18%, according to the Ministry of Transport, as companies opt for faster delivery modes amid time constraints.

A.P. Moller-Maersk A/S, one of the largest shipping lines operating across the Pacific, announced it is expanding capacity immediately following the truce to accommodate the wave of urgent bookings.

Retailers Rebuild Inventories Amid Supply Chain Whiplash

Retailers, still recovering from supply disruptions and inventory depletion caused by prolonged trade friction, are racing to restock ahead of the U.S. holiday shopping season. With ocean transit from China to the U.S. typically taking around a month, this 90-day window aligns tightly with the logistics planning cycle for year-end consumer demand.

Jayendu Krishna of Drewry Maritime Services cautioned that the current boom could stress global supply chains for up to three months unless the truce is extended—or unless President Trump unexpectedly reimposes tariffs during the window. “This pre-tariff rush could cause a wave of logistical bottlenecks if not matched by capacity increases,” Krishna warned.

Shipping Sector Responds, but Skepticism Persists

Despite this surge, overall shipping volumes remain in line with the same period last year, signaling cautious behavior from retailers who either remain wary of the volatility or have already stockpiled goods earlier. According to data from HSBC and Flexport, shipping lines are gradually restoring capacity previously trimmed due to weak demand. The rate of voided sailings dropped from 25% to 13% by May 26, a rapid reversal reflecting the speed at which carriers are adjusting.

Asian Trade Data Reflects Broader Impact of Policy Volatility

Beyond China, recent trade figures across Asia highlight the collateral effects of Trump’s unpredictable tariff policy. South Korea’s exports for the first 20 days of May dropped 2.4% year-on-year, with a 15% plunge in shipments to the U.S. Meanwhile, Japan’s April exports rose just 2%, the weakest pace in seven months, amid weakening U.S. demand.

The 90-day truce between Washington and Beijing has momentarily reignited trade flows, but it also exposes the underlying fragility of global supply chains in a climate of policy uncertainty. For Chinese exporters, this is a window of opportunity—albeit a narrow one. For the global logistics sector, it’s a stress test of responsiveness and resilience. Whether this pace can be sustained or derailed depends not just on business execution, but on the next moves from the White House.

Source: Asia Financial

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Michelle

Cryptocurrency

As Bitcoin has climbed back above the $100,000 level, investors are tempted to liken the rally to the short-lived rallies in January, but recent data and market dynamics suggest that this time the rally is more grounded.

Financial conditions, one of the basic indicators that determine the risk appetite of the markets, present a picture in favor of Bitcoin this time. While the dollar index (DXY) fell by 9% from 109 in January to 99.60, the 10-year US Treasury bond interest rate fell from 4.8% to 4.52%.

These softening conditions are creating a more favorable environment for risky assets. Although 30-year bond yields have risen above 5%, this development is perceived positively for inflation hedge assets such as gold and Bitcoin.

The total market value of stablecoins pegged to the US dollar, such as USDT and USDC, broke the record by reaching $151 billion. This is an increase of about 9% from the average level of $139 billion in the December-January period. The presence of a large capital reserve that can be invested is considered a positive signal for Bitcoin and crypto markets.

Bitcoin’s recent rally from $75,000 has largely been driven by directional buying by institutional investors via spot ETFs.

Open interest in CME Bitcoin futures rose to $17 billion, the most since February, but is still below the $22.79 billion peak in December. In comparison, total inflows into spot Bitcoin ETFs reached $42.7 billion, surpassing the $39.8 billion level in January.

In the past, during Bitcoin’s peaks, there was speculative excitement in memecoins such as Dogecoin (DOGE) and Shiba Inu (SHIB). However, there is currently no significant movement or bubble effect in such altcoins. This shows that the market is moving more cautiously this time.

There is demand for long (bullish) positions in Bitcoin’s perpetual futures market, but funding rates are well below December highs, suggesting leveraged positions are not overdone and the market is not “heating up” yet.

It is not investment advice.

Source: CryptoSlate

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Glendon

Economic

Euro zone government bond yields rose on Wednesday as higher oil prices added further pressure to longer-dated bonds, already struggling globally due to worries about countries' fiscal positions, particularly the U.S.

Germany's 10-year yield, the benchmark for the euro zone, rose 6 basis points to 2.66%, while Italy's 10-year yield climbed nearly 9 basis points to 3.7%. (DE10YT=RR),

Partly responsible for the move was oil, as Brent futuresrose more than 1% on Wednesday after reports that Israel could be preparing to strike Iranian nuclear facilities.

This, combined with above expectations British inflation data were "helping to hoist bond yields across the curve", said Kenneth Broux, head of corporate research FX and rates at Societe Generale, said in a note.

Britain's annual inflation rate hit 3.5% in April, its highest reading since January 2024.

Even with inflation near the European Central Bank's 2% target, rate setters are still keeping a wary eye on it when setting policy.

Markets expect the ECB to cut its key rate to 1.75% by the end of this year; those expectations had been nearer 1.5% last month at the height of worries about the global economic hit from tariffs. (EURESTECBM5X6=ICAP)

Yields in Europe have been moving higher this week, dragged along by U.S. Treasury yields, which have been rising on concerns about the U.S. fiscal position as a tax cutting bill works its way through Congress.

The U.S. 10-year yield was last up nearly 6 bps at 4.54%.

In addition, longer-dated bond yields have been rising more than shorter-dated ones as investors demand a greater premium to hold longer-dated debt.

That has caused yield curves to steepen, in market parlance, and the German two-10 yield curve was at its steepest in over a month, with the 10-year yield 79 bps higher than the two year. (DE2DE10=RR)

If energy prices stay permanently higher, "it is potentially another stone in the sticky inflation and bear steepening pond", Broux said.

Curves "bear steepen" when the gap between longer and shorter dated yields increases because longer-dated yields are rising.

Japanese super-long yields have also moved sharply higher this week, and the 30- and 40-year yields hit new all-time peaks on Wednesday.

Trading Wednesday was also complicated by a Bloomberg Terminal outage which disrupted numerous government bond sales according to several European debt management offices.

Source: TradingView

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Glendon

Commodity

As shown on today’s XBR/USD chart, Brent crude oil prices have jumped (as indicated by the arrow) to a one-week high. This surge follows U.S. intelligence reports suggesting that Israel may be preparing to strike Iran’s nuclear facilities.

Although CNN, citing officials, noted that it remains unclear whether Israeli leaders have made a final decision, oil prices are rising as markets price in the risk of escalation disrupting Middle Eastern oil supply chains:

→ Iran is the third-largest oil producer within OPEC.

→ There is concern that Iran could retaliate by blocking the Strait of Hormuz in the Persian Gulf — a key shipping route used by Saudi Arabia, Kuwait, and others to export oil products.

Technical Analysis of XBR/USD

Brent crude oil price has climbed towards the descending trendline (marked in black), drawn through key highs from April and mid-May. From a bearish perspective, this key resistance could trigger a downward pullback.

On the other hand, recent price action in Brent suggests upward momentum (indicated by blue lines), with the $65.20 level — previously a cap — potentially turning into support after a breakout.

Whether the black resistance line is broken will largely depend on geopolitical developments. It is possible that reports of an imminent missile strike on Iran may later be refuted.