BREAKING: UK inflation negative for first time in 50 years (video)

The UK’s inflation figure will dominate the morning session in Europe. Inflation has gone below zero for the first time since March 1960 – CPI fell by 0.1% in April. Market forecasters have overestimated British economic flows since the turn of the year, suggesting over-confidence in UK plc and opening the door to further downside surprises.
 
This could lead to a dovish sentiment for Sterling and further falls from recent highs. GBPUSD currently sits at 1.5645 and GBPEUR at 1.3947.

 
Upbeat news from down under
 
The Kiwi dollar produced a solid performance in overnight trading, rallying 0.6% against the leading major currencies.

The switch mirrored a rise in benchmark bond yields, leading to increasing Reserve Bank of New Zealand policy trades as the driver behind the rally. The shift in traders’ expectations followed the central bank’s publication of a survey on inflation expectations, which showed respondents’ two-year outlook firmed for the first time in a year.
 
The Reserve Bank of Australia also released its May minutes last night. The key point in the minutes relates to the cautious debate around forward guidance in the post-meeting report – in particular, determining whether to lower the interest rate by 0.25%.
 
“Members agreed that, as at the time of the reduction in the cash rate in February, the statement communicating the decision would not contain any guidance on the future path of monetary policy.” USDAUD and GBPAUD remain unperturbed at 1.2528 and 1.9580 respectively.

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