EUR/GBP, GBP/USD flows: CPI lower, but focus elsewhere

UK CPI came in at 2.8% from 3.3%, partially on base effects but below expectations (3.0%). Ex food energy, food, tobacco 2.5% (mkt 2.6), 5 year low, with notable drops back in services. PPI data does also show the energy cost pressures coming through with output prices 4% from 3% (mkt 2.8%) and input prices 7.7%y/y from 5.3% (mkt 5.9%). Nonetheless, while obviously (even with Government-paid support measures) CPI inflation will rise afresh from this month, we see it averaging just over 3% for 2026 overall, below consensus and BoE thinking.

10 tick blip higher from EUR/GBP but nothing lasting with the focus more on forward looking developments, on the macro, geo and local political front.

Broader focus remains on the somewhat positive albeit hot-cold comments out the White House on prospects of a deal, and some Chinese ships getting through, Brent currently in a holding pattern within this week’s range set on Monday, alongside nervousness over higher yields and stretched tech. The Nikkei saw another drop -1.5% for 5th straight loss, with Kospi (-0.7%) also weighed by Samsung strike prospects. Focus is on reaction to Nvidia earnings after the market closes today, along with bond price action, US10s currently in a couple of basis points from yesterday’s 16 month highs. There is a 20yr auction to test demand later after the recent cheapening.