Market Review - Fundamental Perspective - 11 May 2018

Global equities continued to trade higher yesterday led by the energy sector and fueled by a weaker-than-expected US CPI print. The weaker inflation data also prompted US Treasury yields to fall and the Bloomberg USD Spot Index dropped by 0.6% as a result
NZD retraced some of its losses overnight after falling to its lowest level since December on Thursday vs the USD in the aftermath of a dovish RBNZ meeting
The BoE left its monetary policy unchanged at its May meeting yesterday as widely expected, with a vote split of 7:2. Despite toning down its rhetoric and downgrading its GDP forecast for 2018, the MPC remains constructive and continues to signal ongoing gradual tightening. It appears that Carney still wants something priced in for this year, given his comments during a BBC interview later in the day, that a rate increase is ‘likely by the end of the year’
Rate expectations will likely be very data dependent going forwards. Barclays Research forecasts of no hikes until at least the end of 2019 as they believe that “data is likely to continue to contradict the BoE’s expectations of a pickup”
Our traders currently see GBPUSD support at 1.3450 and resistance at 1.3615-60. EURGBP finds support at 0.8720, while resistance lies at 0.8840-75
In Italy, equities closed down and front-end BTP yields increased amid increasing political uncertainties as the populist parties, 5SM and Lega, continued discussions on forming a government

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