• Forex today was all about the BoE and US CPI and Central Bank divergence while geopolitics take a back seat allowing for some profit taking.
• US CPI disappointed, rising by just 0.2% in April after falling 0.1% in March, missing expectations.

The BoE accompanies the RBNZ on a dovish tone and markets look for an exit from policy normalization trades where all bets for a rate by either Central Bank are diminished, (BOE downgrades inflation/growth forecasts, sterling tumbles hard 160 pips).

Meanwhile, the US CPI disappointed, rising by just 0.2% in April after falling 0.1% in March, missing expectations. Also, Core CPI rose less than expected too, +0.1% vs consensus +0.2%. Year on year, the rate held at 2.1%, though mainly due to base effects from a soft patch in consumer prices a year ago. As a result, the US 10's fell from 2.99% to 2.94% ending the US session around 2.96%. 2yr yields were net unchanged at 2.53%. The US dollar fell across the board within the day's range of between 92.5410-93.1640 after the CPI data and the Fed's fund futures yields are pricing in two more rate hikes by year-end.

Currency price action

As for other currencies, the single unit was higher after a choppy session. EUR/USD opened around 1.1870 and ticked higher to 1.1885 before the CPI numbers. The pair popped onto the 1.19 handle to 1.1950 before the dollar recovered some ground sending the euro back to the opening price. The market sold the dollar again and the euro rallied back to 1.1925, closing at 1.1916. GBP/USD recovered from the BoE lows of 1.3459 to 1.3526 on the BBC reporting that BoE's Carney said that rates are likely to rise by end of 2018, with cable ending the US shift at1.3515. As for the cross, it ended the US shift at 0.8820, higher by  +0.83% and traded in a range of between 0.8836-0.8743. The yen was sent lower to 110.02, (110.05 May trend high), in London morning but fell as far as 109.32 CPI post-data, (below Daily Tenkan at 109.37). However, geopolitics were less of a concern on Thursday, where Trump and Kim's meeting is confirmed while the Iran news has had little impact. AUD/USD rallied hard on the CPI data sending the price to 0.7535 and after some volatility, stabilised for a close of 0.7532.

Key notes from US shift:

Wall Street stocks lifted by low inflation, earnings and trade war optimism

Key events ahead:

Analysts at Westpac explained the key events ahead: "At 11:30am Syd/9:30am Sing/HK we see Australia Mar housing finance approvals. Industry figures point to a significant pullback; Westpac looks for -3%mth. Auction clearance rates have fallen and tighter lending criteria could be having an impact. AUD usually does not respond to this release. Singapore releases Mar retail sales data. The series can be hard to forecast, so might produce revision to the Q1 GDP estimate."