Global Rates
ECB deposit
2.00%
Unchanged
BOE base rate
3.75%
Unchanged
BoJ policy rate
0.75%
Unchanged
US Flash PMI May
55.3
+0.8 vs Apr.
WTI Oil
~$97
Iran risk
US 10Y yield
4.57%
Stable
The US Flash Manufacturing PMI for May (55.3 — highest since May 2022) is the central catalyst for this global rates screening. Such a strong PMI consolidates American exceptionalism and strengthens the dollar — which is mechanically disinflationary for import-dependent economies like the eurozone and Japan, further reducing the urgency to hike for the ECB and BoJ. WTI is still hovering around $97: Iran complicated negotiations by ordering that its enriched uranium reserves remain on national territory. This creates a geopolitical risk premium on oil, but WTI remains structurally below $100 — far from April's $126. For the eurozone, eyes are on the May 30 HICP flash (in 7 days): with WTI at $97, the dynamic is clearly disinflationary. For the BoJ, a stronger dollar (supported by the US PMI) stabilizes the yen without requiring a rate hike. Markets at 84% for ECB and BoJ +25bp in June remain anomalies, even with slight Iran uncertainty.
Today's Market Moves
BoJ: +25bp June
84%→82%-2pp
Strong dollar (US PMI 55.3): yen stabilized without BoJ action. Our NOs gain.
ECB: +25bp June
84%→83%-1pp
WTI $97: May HICP flash (May 30) expected lower. ECB can wait.
BOE: hike 2026
68%→69%+1pp
Slight increase: UK services stickiness confirmed
CBR: cut June
85%→85%0pp
Stable
ECB: +25bp July
37%→36%-1pp
If ECB pauses in June, July even less likely
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | BoJ: +25bp June | Jun 2026 | 82% | 58% | -24pp | SELL YES | $133K | 7/10 |
| 2 | ECB: +25bp June | Jun 2026 | 83% | 61% | -22pp | SELL YES | $347K | 7/10 |
| 3 | ECB: +25bp July | Jul 2026 | 36% | 19% | -17pp | SELL YES | $N/A | 5/10 |
| 4 | BOE: hold July | Jul 2026 | 77% | 64% | -13pp | SELL YES | $N/A | 4/10 |
| 5 | BOE: hike 2026 | Dec 2026 | 69% | 79% | +10pp | BUY YES | $31K | 6/10 |
| 6 | BOE: +25bp June | Jun 2026 | 3% | 12% | +9pp | BUY YES | $226K | 5/10 |
| 7 | CBR: cut June | Jun 2026 | 85% | 77% | -8pp | NEUTRAL | $53K | 4/10 |
| 8 | RBA: hike June | Jun 2026 | 10% | 7% | -3pp | NEUTRAL | $29K | 3/10 |
Top 5 Opportunities
1
BoJ: +25bp June — NO
↓ SELL YES-24pp
Market price
82%
Fair value
58%
Gap: -24pp
Thesis reinforced by two simultaneous dynamics. First, US PMI 55.3: a stronger dollar (supported by American exceptionalism) mechanically stabilizes the yen without the BoJ needing to act through rates. The yen pressure argument — central to BoJ hawks — is easing. Second, WTI at $97 (despite Iran) reduces imported inflationary pressure on Japan — which imports 90% of its energy. The April BoJ vote (6-3 for status quo) is unchanged. US tariffs on Japanese cars are weighing on Q3-Q4 export prospects. 82% remains a significant overestimate.
▵ Bull case
- 3 active BoJ dissenters: growing internal pressure
- Spring Shunto: +5% wage increases → domestic demand
- Japan core CPI 2.8% above 2% target
- Weak yen if dollar suddenly weakens
▿ Bear case
- US PMI 55.3: strong dollar = yen stabilized without BoJ action
- WTI $97: reduced imported inflationary pressure for Japan
- 6-3 vote: comfortable majority for status quo
- Japan FY2026 GDP revised to 0.5% — economic slowdown
- US auto tariffs: export shock Q3-Q4
2
ECB: +25bp June — NO
↓ SELL YES-22pp
Market price
83%
Fair value
61%
Gap: -22pp
Central catalyst: the eurozone May HICP flash is published May 30 — 6 days before the June 5 ECB meeting. With WTI at $97 (vs. $126 in April), the energy component of HICP will be mechanically negative. If the HICP flash shows a deceleration toward 2.5-2.8%, the ECB will have grounds to wait another meeting. The ECB already held in April despite 3.0% inflation — the institutional precedent is established. The ECB generally prefers to wait for 2-3 months of data before acting. A strong dollar (US PMI 55.3) strengthens the euro vs. dollar, adding a further disinflationary factor for European imports.
▵ Bull case
- April HICP 3.0%: well above 2% target
- German fiscal stimulus: solid domestic demand
- Bloomberg consensus: two ECB hikes in 2026
- Persistent wage pressures in the eurozone
▿ Bear case
- ECB held in April at 3.0%: strong institutional precedent
- WTI $97 → May HICP flash (May 30) expected to decline toward 2.6-2.8%
- Strong dollar (US PMI): stable or rising euro = imported disinflation
- ECB cautious: no hike without 2-3 months confirming the trend
3
BOE: hike 2026 — YES
↑ BUY YES+10pp
Market price
69%
Fair value
79%
Gap: +10pp
UK CPI remains structurally higher than the rest of the G7. The OECD projects 4% for 2026 — second G7 after the US. One active hawkish dissenter (8-1 vote in April). UK services CPI above 5% is very sticky. The April MPC report confirmed a projection of rising inflation in H2 2026 via energy prices and tariffs. The publication of UK May CPI on June 18 (same day as the BOE meeting) is the key: if it confirms acceleration, the MPC can no longer ignore the hawks. 69% for at least one hike by December underestimates this probability.
▵ Bull case
- UK CPI OECD projection 4% 2026: major hawkish pressure
- UK services CPI > 5%: very sticky component
- 1 hawkish dissenter already present (8-1 vote)
- MPC report: CPI expected to rise in H2 2026
- UK May CPI published on same day as BOE meeting: data-dependent decision
▿ Bear case
- 8-1 vote: very comfortable majority for status quo
- Fragile UK growth: stagflation risk
- WTI $97: energy disinflation visible in UK too
- Low liquidity ($31K): wide spread
4
ECB: +25bp July — NO
↓ SELL YES-17pp
Market price
36%
Fair value
19%
Gap: -17pp
Secondary trade but logical. If the ECB does not hike in June (our base scenario), July is even less likely — the ECB doesn't string hikes in consecutive months without an intermediate data review. If the ECB does hike in June (adverse scenario), it typically takes a pause to assess the impact. In both cases, 36% for a July hike appears excessive. This trade is conditional on the June ECB position.
▵ Bull case
- ECB constrained by inflation: double hike possible if data surprises
- May HICP surprise to the upside
▿ Bear case
- ECB historically cautious: never two consecutive hikes without a pause
- May HICP expected lower with WTI $97
- Bloomberg consensus: June hike + September (not July)
- UK data only available in June: ECB will wait
5
BOE: +25bp June — YES
↑ BUY YES+9pp
Market price
3%
Fair value
12%
Gap: +9pp
Asymmetric position at very low cost (3¢ for a YES). UK May CPI comes out June 18 — same day as the BOE meeting. If inflation accelerates toward 4%+ (possible scenario per OECD), the MPC has real-time data to decide. The precedent exists: BOE surprised with a 50bp hike in June 2023 when inflation was tenacious and higher than expected. At 3%, this is an asymmetric bet: the loss is small (3¢), the gain is large if hawkish surprise.
▵ Bull case
- UK May CPI could accelerate toward 4% if services persist
- 2023 precedent: BOE surprise 50bp hike
- 1 active hawkish dissenter: only 4 more needed
- CPI published on day of meeting: fully data-dependent decision
▿ Bear case
- 8-1 vote: need to convince 4 additional members in 4 weeks
- WTI $97: partial disinflation visible in UK too
- BOE: financial stability comes before inflation reactivity