Headlines:
- UK May flash services PMI 51.8 vs 57.3 expected
- Pound sinks as UK cost-of-living crisis casts doubt over BOE rate hikes
- ECB's Lagarde: We are not in a 'panic mode' to raise rates
- ECB's Lagarde: Markets shouldn't translate words into any percentage point moves
- ECB's Lagarde: We are attentive to the level of the euro
- ECB's Villeroy: A 50 bps rate hike isn't part of the ECB consensus
- ECB's Holzmann: A 50 bps rate hike in July would be appropriate
- France May flash services PMI 58.4 vs 58.5 expected
- Germany May flash manufacturing PMI 54.7 vs 54.0 expected
- Eurozone May flash services PMI 56.3 vs 57.5 expected
Markets:
- JPY leads, GBP lags on the day
- European equities lower; S&P 500 futures down 1.1%
- US 10-year yields down 4 bps to 2.82%
- Gold up 0.2% to $1,858.07
- WTI crude up 0.3% to $110.61
The session started with more of a risk-off hint as equities slumped and bonds were bid, though the dollar was a little sluggish. The more dour mood was maintained throughout but there some notable moves in FX related to the euro and pound.
ECB president Lagarde confirmed a rate hike in July and reaffirmed that they will move out of negative rates "most likely" by the end of Q3. That saw the euro nudge higher with EUR/USD moving up from 1.0670 to 1.0720. The pair is keeping thereabouts with the dollar seen more mixed now, keeping slightly higher against commodity currencies but lower against the euro and yen.
USD/JPY was consistent as it held around 127.30-40 levels throughout while the aussie and kiwi are seeing light losses against the greenback on the day.
The pound was the other notable mover as it was sold following a dismal UK PMI report. The data highlighted recession risks and casts doubt over the BOE's tightening cycle, with the rates market paring back expectations from five rate hikes for the remainder of the year to four rate hikes instead.
GBP/USD tumbled from 1.2570 to 1.2475 before keeping around 1.2500 at the moment. It is funny how the BOE thinks they can influence the inflation debate when the lack of fiscal action leads to stuff like this. *coughs in inflation*
Elsewhere, equities remained sluggish with US futures lagging by quite a bit. Tech is bearing the brunt of the pain after Snap's warning earlier in the day here. S&P 500 futures are down 1.1%, Nasdaq futures down 1.7%, and Dow futures down 0.7%.
