Insights 
VT 
The United Kingdom Consumer Price Index (CPI) for April showed a year-on-year increase of 3.5%, surpassing the forecast of 3.3%. The data indicated a rise from the previous month’s figure of 2.6%, providing a temporary boost to the British Pound.
EUR/USD maintained gains below 1.1350 in European trading amid US dollar weakness. Concerns about US fiscal health and trade uncertainties contributed to the Greenback’s pressure, with attention shifting towards central bank communications.
Gold Prices Surge
Gold prices reached nearly a two-week high, stabilising above the $3,300 mark. Factors such as US fiscal challenges and a recent credit rating downgrade of the US government continued to influence the USD.
Dogecoin and Shiba Inu exhibited early signs of a bullish breakout as both stabilised at key support levels. On-chain data revealed positive funding rates, which, along with halted activity, favoured a positive outlook for these cryptocurrencies.
In China, April’s economic slowdown reflected the impact of ongoing uncertainties. While retail sales and fixed-asset investments underperformed, the manufacturing sector was less affected than anticipated.
Uk Inflation Unexpected Rise
The uptick in UK inflation to 3.5%—above the expected 3.3%—caught many by surprise, largely reversing the broader trend of deceleration seen earlier in the year. Compared to March’s softer 2.6%, this sharper incline could nudge expectations around the Bank of England’s next move. For those observing yield curves and implied rate paths, this confirmed that pricing had yet to fully reflect the reappearance of price pressure. It also suggests that disinflationary momentum may be stalling more than initially thought, likely pushing terminal rate expectations fractionally higher. Notably, any rate cut speculation has now been shelved, at least for this quarter.
Sterling reacted positively, but the real story lies deeper than short-term forex positioning. Gilt markets could soon see an increase in volatility as traders begin to recalibrate their expectations. Repricing risk-premiums becomes more complex under inflation surprises, meaning exposures along the short end might require tighter hedging. In recent sessions, we’ve observed a modest inversion flattening – a detail that may turn overemphasised if inflation fails to moderate in upcoming prints.
Meanwhile, in the Eurozone-US currency cross, the Euro maintains a firm grip near the 1.13 handle. The dollar finds itself under repeated pressure. Washington’s fiscal outlook continues to raise questions. Lingering concerns over long-term debt servicing have fused with a not-so-subtle softening in recent economic data – prompting revaluation of forward rate differentials. Central bank communication this week will be combed through for any shift in tonality. The balance between inflation control and growth preservation remains tight. Dollar risk premium continues to compress. Treasury yields, if they fall further, may struggle to keep aggressive dollar bulls in the game.
That segment of the market aligned with metals—particularly gold—has found renewed interest. The metal’s advance back above the $3,300 threshold signals that safe-haven demand is far from abating. Fiscal strain in the US, coupled with a downgrade of sovereign credit, filters directly into bid strength. For traders with exposure to volatility products or delta-neutral gold positions, premiums have responded accordingly. Covered calls are increasingly expensive, suggesting the market is pricing broader uncertainty into the current rally. We see this behaviour extending into options skew along major expiry windows later this month.
In the digital asset space, some of the late-cycle meme tokens are showing surprising signs of life. Both Dogecoin and Shiba Inu stabilised at established supports, and funding rates flipped positive—an early hint that traders are leaning long with conviction. Liquidation charts indicate minimal forceful selling, which could enhance the probability of further upside. Volatility, while still elevated, appears to be clustering around previous highs, hinting that accumulation may be underway. For those running arbitrage, basis values have grown wider, an indication of residual upward pressure.
Looking towards Asia, China’s slowing April data missed expectations on multiple fronts—retail and fixed investment came in soft. However, manufacturing was steadier than most had priced in. This somewhat curbs the downward momentum. Nonetheless, the probability of targeted stimulus increases if consumption continues to slide. If that materialises, FX and commodities could respond sharply. Any policy move would likely ripple through global inflation-linked assets, particularly in USD-denominated markets. Traders with exposure to EM risk will want to stay alert for a PBoC statement or action, especially near key data windows.
All eyes will remain on macro data prints and policy statements, but the divergence in regional outlooks is already at play in swap rate spreads and synthetic positioning.
