Europe Summary and Highlights 17 Jun
UK CPI lower than expected, EUR/GBP drifting off YTD range base
Riksbank notes increased hike risks late year, but core view support unchanged
Contained trade as market waits for the key FOMC meeting
European morning session
Fairly subdued, as FX markets wait on the FOMC meeting.
Riksbank leaves rates unchanged as universally expected. Says probability of a hike later in the year has increased vs March, but forecasts support the main view that policy is ‘well-balanced to leave unchanged’ amid low inflation and somewhat weaker than normal activity. Forecasts have GDP at 2.2% (2.5%) and 2.3% (2.6%) for 2026 and 2027, and CPIF at 1.1%(1.5%) and 1.7%(1.3%). Rate projections nudged up 4-8bp across projection but still only shy of 2% (1.93%) by Q2 2027.
Swedish survey inflation expectations at 1.7% and 2.1% for 12monts and 5yrs respectively, both up 0.1pp.
UK CPI on the low side of expectations, sticking at 2.8% (mkt 3%), with core 2.6% from 2.5% (mkt 2.7%). Further supports view BoE comfortably on hold through summer and in our view this year. Minor 10 tick blip on EUR/GBP on the release but only as part of recent modest lift from the YTD range floor and data is in some respects supportive for GBP’s recent more constructive tone
Asia Session
To assist with his plan to reopen the Strait and keep oil price down, Trump is thinking about a fee-based naval escort scheme while using The Defense Production Act to force U.S. insurer to provide coverage. Oil continues to trade lower on optimism while equities perform individually. AUD/USD is trading 0.07% lower at 0.7062. NZD/USD is trading 0.1% lower while USD/CAD is unchanged.
Market participants are still digesting Tuesday's BoJ meeting and see USD/JPY consolidating recent moves. JGB yields are further lower across the curve after BoJ announcing a pause in bond purchase tapering. USD/JPY is trading 0.06% lower at 160.27. Else, EUR/USD and GBP/USD are up 0.04%.