Forexlive European FX news wrap: UK inflation surprises to the upside

• US House Speaker Johnson: We came to $40,000 SALT deduction cap agreement

• ECB’s de Guindos: 2% price goal to be reached sooner than later
• US MBA mortgage applications w.e. 16 May -5.1% vs +1.1% prior
• ECB’s Kazaks: The ECB will soon reach terminal rate if baseline holds
• ECB’s de Guindos: Equity valuations are high, credit spreads out of sync with risk
• Traders trim bets on BoE easing favouring just one rate cut in 2025
• UK April CPI +3.5% vs +3.3% y/y expected
• FX option expiries for 21 May 10am New York cut
• Japan’s super-long bond yields continue to surge to record highs
• What are the main events for today?

Calling today’s session boring would be an euphemism. The newsflow was extremely limited and we got no data other than the UK CPI report. The UK inflation figures beat expectations by a big margin and triggered a repricing in interest rates expectations with the market now favouring just one rate cut in 2025.

Global long term yields remain elevated as bond traders might not only worry about debts now but also about inflation as central banks continue to downplay inflation risks and focus more on the growth part.

In the final part of the session we also got the news that Republicans have reached an agreement to increase the state and local tax (SALT) deduction to $40,000, which was one of the final hurdles holding up Trump’s “big, beautiful bill”. The House Speaker has also said that they could vote on the bill tonight.

This article was written by Giuseppe Dellamotta at www.forexlive.com.