Frantisek Taborsky

Cross-market volatility is falling again. This looks largely down to Friday’s benign US jobs release and a relatively quiet US data calendar this week. We see the dollar trading ranges but are looking for some independent moves in the Swedish krona and British pound at this week’s rate meetings. And lower volatility will keep the carry trade in demand

It’s a close call, but we expect the Riksbank to overlook the recent krona weakness and cut by 25bp today. This may be a ‘hawkish’ hike to reduce the FX fallout, but could add fuel to the European-US monetary divergence and spill over into the broader European currency market. Meanwhile, a weak Japanese yen may continue to help the dollar, too

Sterling will be the focus today, and the key area to watch will be whether the BoE drops hints about a June rate cut

Amid quiet FX trading conditions, attention during European hours falls squarely on the Bank of England's policy decision announced at 1:00pm CET.

Inflation in Central and Eastern Europe has reached this year’s lows and we are likely to see a rebound in some countries. Here, the challenge will be to distinguish between one-off effects and persistent inflationary pressures. It is clear that the battle with inflation is not over, which will complicate further rate cuts in the region

The dollar dropped after slightly higher than expected US jobless claims yesterday

Markets appear to be giving an asymmetrically larger weight to the encouraging bits of US data releases (like yesterday’s PPI), perhaps mirroring communication by the Fed which has failed to turn much more hawkish as disinflation has stalled. Today’s CPI will be pivotal: we expect a 0.4% MoM core print, in line with consensus

We suspect that the Fed pricing after the US CPI is already embedding some optimism on core PCE (released 31 May) and jobs figures in early June. With no key data before that PCE print, FX volatility may drop again, and the dollar may stabilise or recover some ground in the next couple of weeks. A move to 1.10 in EUR/USD looks premature

In the two weeks leading to the 31 May US core PCE release, markets may experience reduced volatility. This is not necessarily bad news for the high-yielding USD, but the yen looks more fragile. A stabilisation in EUR/USD around 1.08/1.09 or some modest downside pressure is our expectation for the near term

The forint has been remarkably strong since the central bank’s last decision, so both market stability and macro fundamentals would, in our view, justify maintaining the previous pace of rate cuts. We therefore see a 50bp cut in May