🎯 Top Story

🇫🇷 French inflation hits two-year high, backing ECB June rate hike expectations

What happened: French inflation surged to its highest level in over two years, reinforcing market expectations for an ECB rate hike in June.

Why it matters: France is the euro zone's second-largest economy. Hot inflation data from Paris adds pressure on the ECB to act.

Market impact: 🟢 Bullish for the euro. A June hike is looking increasingly likely.

🔥 Quick Takes

💶 Euro

• 🇪🇺 ECB: Iran war may push up consumer medium-term inflation expectations → A hawkish signal. The war is feeding into price expectations.
• 🇫🇷 French inflation hits two-year high → See Top Story.
• 🗣️ ECB's Schnabel: The ECB can no longer look away from the inflation impact of the Iran war → A clear hawkish warning. Action is coming.

💷 Pound

• 📈 Money markets price about 50 basis points of BOE hikes by year-end, with more tightening expected after → Hawkish expectations are building. Sterling has support.
• 🗣️ BOE Governor Bailey: Could tolerate inflation above 2 percent to support weak economy, as long as no "second-round effects" appear → A dovish tilt. The BOE is in no rush to crush growth.

💴 Yen

• 🗣️ Japan's Kihara: Deeply concerned about speculative FX moves → Verbal intervention. The yen is under watch.

🌏 Other

• 🇨🇦 Canada enters first technical recession since 2020 → A dovish signal for the BoC. Rate cuts may come sooner.
• 🇨🇳 PBOC nets 247 billion yuan withdrawal via reverse repos → Liquidity is being drained. A slight tightening signal.
• 🇸🇦 Saudi central bank net foreign assets at 1.768 trillion riyals in April → Ample reserves. The kingdom has firepower.
• 🇳🇴 Norges Bank to sell 100 million Norwegian kroner per day in June, unchanged from May → A steady pace. No change in intervention strategy.
• 🇵🇭 Philippines central bank: No target for specific exchange rate levels; only participates to maintain orderly market conditions → Hands-off approach. The peso will find its own level.
• 🗣️ Fed Governor Powell: A politicized Fed would destroy public trust; the Fed is facing stress tests → Defending central bank independence. A signal that the Fed will not bow to political pressure.
• 🇰🇷 Bank of Korea governor: Korea is similar to euro zone countries – sensitive to energy price shocks. High dependence on energy imports. → A vulnerable position. The won faces risks from oil prices.

📊 Key Data Snapshot

💡 Technical Analysis

🇪🇺 EUR/USD – 1.1655

Resistance: 1.1654 (R1) / 1.1657 (R2) / 1.1660 (R3) → Break above R1 targets R2

Support: 1.1648 (S1) / 1.1645 (S2) / 1.1642 (S3) → Break below S1 opens S2

Call: Neutral – MAs show 11 Buy / 1 Sell (Strong Buy), but indicators show 3 Buy / 5 Sell (Sell). RSI at 52.8 is neutral.

🇬🇧 GBP/USD – 1.3465

Resistance: 1.3480 (R1) / 1.3487 (R2) / 1.3498 (R3) → Clear R1 for upside

Support: 1.3462 (S1) / 1.3451 (S2) / 1.3444 (S3) → Break below S1 opens S2

Call: Strong Buy – 12 MA Buy / 0 Sell. 9 indicators Buy / 0 Sell. RSI at 58.0.

🇯🇵 USD/JPY – 159.47

Resistance: 159.49 (R1) / 159.54 (R2) / 159.58 (R3) → R1 is the first test

Support: 159.40 (S1) / 159.36 (S2) / 159.31 (S3) → Holding above S1 keeps bull case alive

Call: Strong Buy – 12 MA Buy / 0 Sell. 8 indicators Buy / 0 Sell. RSI at 59.3.

data from investing.com

💡 Final Takeaway

🇫🇷 French inflation hit a two-year high, backing ECB June hike expectations.

🇪🇺 Schnabel said the ECB can no longer look away.

🇬🇧 BOE hike pricing is building, but Bailey signaled tolerance for above-target inflation. 🇯🇵 Japan warned on speculative FX moves.

🇨🇦 Canada slipped into a technical recession.

🇰🇷 Korea is sensitive to energy prices. On the technical side, GBP/USD and USD/JPY show Strong Buy signals, while EUR/USD remains neutral.

🔮 Looking Ahead

• 🇪🇺 ECB June meeting – will they hike?
• 🇫🇷 French inflation – more upside surprises?
• 🇬🇧 BOE – will Bailey's dovishness win out?
• 🇨🇦 Canada recession – will the BoC cut?
• 🇯🇵 Japan intervention – words or action?