Investors probably will remain cautious to place big bets going into the Fed and the ECB meeting. Even so, the downside in US yields probably is better protect compared to Europe. In this context, there is also little reason to expect EUR/USD to easily regain the 1.1095 previous top ahead of the Fed/ECB meetings. The EUR/USD technical picture shows some cracks.
UK March price data printed well above expectations. Headline CPI inflation rose 0.8% M/M and 10.1% Y/Y (0.5% and 9.8% expected). Core inflation stabilized at 6.2% while a decline to 6% was expected. PPI was also higher than expected. Combined with yesterday’s strong labour market data, the report gives the BoE little choice but to continue its hike cycle at the May 11 meeting. Sterling gains immediately after the release. EUR/GBP dropped to the 0.882 area. However, yesterday’s price action showed that one should be cautious to draw early conclusions.