US Inflation Steady, UK Economy Contracts, and Producer Prices Show Modest Growth

Here’s your latest economic snapshot:

• US annual inflation rose slightly to 2.4%
• UK economy shrank by 0.3%
• US producer prices rose slightly by 0.1%

Stay informed with these critical updates!

Market Recap:

U.S. Consumer Price Index (CPI) YoY: In May 2025, US annual inflation rose slightly to 2.4% from 2.3% in April, but stayed below the expected 2.5%. Prices increased mainly for food, transportation services, and vehicles, while shelter costs eased and energy prices continued to decline. Monthly inflation growth was modest at 0.1%, below forecasts. Core inflation remained steady at 2.8%, below the expected rise.

U.K. Gross Domestic Product (GDP) MoM: In April 2025, the UK economy shrank by 0.3% month-on-month, the first drop in six months and the largest since October 2023, despite expectations of only a 0.1% decline. The slowdown was driven by higher energy costs, increased National Insurance contributions, higher Stamp Duty, and new tariffs announced by President Trump. Services output fell 0.4%, with sharp declines in legal services, advertising, and wholesale trade. Production also fell 0.6%, led by manufacturing and utilities, while construction grew 0.9%. Despite April’s contraction, UK GDP still rose 0.7% over the past three months.

U.S. Producer Price Index (PPI) MoM : In May 2025, US producer prices rose slightly by 0.1% month-over-month, below the expected 0.2% increase, after a revised 0.2% drop in April. Goods prices increased 0.2%, led by tobacco and items like gasoline and coffee, while jet fuel prices fell 8.2%. Service costs rose 0.1%, with notable jumps in machinery and vehicle wholesaling, travel accommodations, and retail sectors. Airline passenger service prices declined 1.1%. Core producer prices also rose 0.1%, below the forecasted 0.3%. Year-on-year, producer prices increased 2.6%, matching expectations, while core annual inflation eased to 3% from 3.2%.

Oil and Commodities:

Brent Crude: Oil prices surged over 8% to $73.76 per barrel, hitting multi-month highs amid the Israeli-Iran conflict.

Gold: Gold prices jumped to $3,437.21 amid safe-haven demand.

Currency Watch:

EUR/USD: Meanwhile, the euro climbed to 1.15548, marking its fourth consecutive session of gains.

GBP/USD: Last week, the pound came under pressure after a series of weak UK reports on manufacturing activity, employment, and economic growth. On Friday, the pound dropped nearly 0.7% to $1.35225 as Israel’s strikes on Iran drove investors toward safe-haven assets like the dollar, weighing on risk-sensitive currencies including the Australian dollar.

USD/JPY:  Last week, the dollar gained 0.3% to 143.88 against the yen, as markets showed a typical knee-jerk reaction to geopolitical tensions—though historically, such moves tend to fade as investors look past short-term shocks.

Bitcoin stayed at $105,720. Ethereum rose to $2,733

Preview of the Upcoming Week:

June 16, 2025

Japan Interest Rate Decision: Japan’s benchmark interest rate remains at 0.50%, with no changes expected this quarter. However, a gradual rise to 1.00% by 2026 is forecasted, signaling a possible shift away from Japan’s ultra-loose monetary policy. This could strengthen the yen and impact key currency pairs like USD/JPY, EUR/JPY, and GBP/JPY. Risk-sensitive pairs such as AUD/JPY and NZD/JPY may face increased volatility. On the equity side, a tightening stance could pressure Japan’s Nikkei 225 and TOPIX indices, while rising bond yields may weigh on Japanese government bond prices.

June 18, 2025

Eurozone Consumer Price Index (CPI) YoY: In May 2025, the inflation rate in the Euro Area decreased to 1.9% from 2.2% in April. According to analyst forecasts, inflation is expected to reach around 2.0% by the end of this quarter. Looking ahead, inflation is projected to hover near 1.8% in 2026 before rising to approximately 2.1% in 2027. Given this outlook, traders should watch the euro (EUR) for potential volatility as central bank policies adjust, European government bonds which may benefit from lower inflation pressures, and European equities, especially in consumer and industrial sectors that can be sensitive to inflation trends. Additionally, commodity prices, particularly energy, may also be influenced by these inflation changes.

U.K. Consumer Price Index (CPI) YoY: In April 2025, UK inflation rose to 3.5% from 2.6% in March and is expected to reach 3.7% by quarter-end. Inflation is forecasted to ease to around 2.3% in 2026 and 1.9% in 2027. Traders should watch GBP pairs like GBP/USD and EUR/GBP for volatility, UK government bonds, and UK equity indices such as the FTSE 100 and FTSE 250. Sectors sensitive to inflation, including consumer goods and energy, may also see notable

Fed Interest Rate Decision: The benchmark interest rate in the United States is currently at 4.50% and is expected to remain at this level by the end of the quarter. Looking ahead, the Fed Funds Rate is projected to decline to around 3.50% in 2026 and 3.25% in 2027. Traders should monitor USD pairs like USD/EUR and USD/JPY, U.S. Treasury yields, and major U.S. equity indices such as the S&P 500 and Nasdaq for market reactions to these rate expectations.

June 19, 2025

U.K. Interest Rate Decision: The benchmark interest rate in the United Kingdom stands at 4.25% and is expected to hold steady through the end of this quarter. Over the longer term, it is projected to decline to around 3.00% in 2026. Traders should keep an eye on GBP pairs like GBP/USD and EUR/GBP, UK government bonds, and UK equity indices such as the FTSE 100 for potential market impacts from these interest rate trends..

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