A look at the day ahead in European and global markets from Ankur Banerjee
Dollar selling continues for another session, though without much aggression, as investors remain uneasy amid rising U.S. Treasury yields and uncertainty over trade negotiations and the fiscal outlook of the U.S. economy.
Despite higher yields, demand for safe-haven currencies like the yen and Swiss franc remains strong, while the euro climbs to a two-week high, suggesting that market nerves are overpowering traditional correlations. Normally, rising yields support the dollar—particularly against the yen—but that trend has been breaking down in recent weeks as President Donald Trump’s unpredictable trade decisions unsettle global investors and reduce confidence in U.S. assets.
All eyes on UK data and Marks & Spencer earnings
During European hours, focus will shift to key UK data and earnings results. British retailer Marks & Spencer (M&S) is due to release annual earnings, following a major cyberattack that disrupted operations a month ago. Analysts estimate the attack could have wiped more than £60 million ($81 million) from its profit, with online sales particularly affected after the company was forced to halt digital ordering.
Wednesday’s report is expected to provide insights into the financial fallout from the incident, while also potentially signaling how quickly M&S can recover from such a costly disruption.
Meanwhile, UK inflation data for April will be closely watched. The Bank of England’s (BoE) recent 25-basis-point rate cut on May 8 and traders’ expectations for another in June make this report especially important. Any surprise in cost pressures could shift rate cut expectations and stir volatility in currency and bond markets.
Economists surveyed by Reuters forecast the consumer price index (CPI) to rise 3.3% in April, up from 2.6% the previous month, largely due to regulated utility tariffs increasing. If confirmed, this would suggest inflation is still sticky enough to complicate BoE’s easing path, despite recent better-than-expected UK GDP numbers that prompted upgrades to the country’s 2024 growth outlook.
Japan bond market struggles amid BoJ tapering efforts
Japanese markets also reflect investor discomfort. Long-dated Japanese government bonds (JGBs) remain under pressure, after a disappointing auction Tuesday sent yields surging to record highs.
The Bank of Japan (BoJ) now faces a dilemma: it wants to scale back bond-buying and normalize monetary policy, but soaring yields raise borrowing costs and add stress to Japan’s already heavily indebted government balance sheet. That’s a delicate balancing act the BoJ cannot afford to mishandle.
What to watch on Wednesday
Key economic events:
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UK April CPI inflation data
Corporate earnings releases:
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Marks & Spencer (M&S)
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JD Sports
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