Sunset Market Commentary

ECB and BoE held rates steady but flagged rising upside inflation risks as oil surged, leaving markets torn between growth concerns and renewed price pressures. Euro‑area Q1 growth unexpectedly slowed to 0.1% q/q while April CPI accelerated to 3.0% y/y (energy +10.9%), complicating the ECB’s policy path despite a unanimous hold at 2%. A temporary jump in oil (June contract to about $126) and firmer core US PCE (core 4.3%) added volatility, though overall market reaction was muted and EUR/USD traded near 1.17. The BoE also paused at 3.75% (8‑1 vote), scaling back June hike odds after an intraday oil dip. UK yields and sterling moved modestly. The mix of higher headline inflation, softer growth and central bank caution creates a conflicted outlook for EUR/USD and rate expectations across Europe and the UK.