UK Inflation Cool In May but Upward Pressures Persist, Sweden Cuts Rates

Bridgette Randall
18 Jun, 2025
London

European markets rebounded as investors weighed the ongoing Iran-Israel war and awaited rate decisions from major central banks. 

Benchmark indexes in Frankfurt, Paris, Milan, and London hovered near the flatline, and the war between Israel and Iran extended to the sixth consecutive day. 

Crude oil prices traded near the five-month high, and natural gas prices rebounded to €40 per unit amid speculation that the U.S. is preparing to provide advanced military assistance to Israel. 

Moreover, Iran has threatened to cut off shipments from the Strait of Hormuz, which could disrupt global energy supply in the immediate future. 

The Riksbank lowered its key lending rate by 25 basis points to 2.0%, and Sweden's central bank cited weakening economic recovery and inflationary forces. 

The annual inflation rate in the UK edged lower to 3.4% in May from 3.5% in the previous month, the Office for National Statistics reported Wednesday. 

Core inflation, which excludes volatile food and energy prices, decreased to 3.5% from 3.8% in the previous month. 

The Bank of England is widely anticipated to hold its policy rate on Thursday amid weak economic growth and persistent inflation.

The U.S. Federal Reserve is expected to hold steady Fed Funds rates amid escalating trade tensions and uncertainty rooted in U.S. trade policy.

 

Europe Indexes and Yields

The DAX index decreased by 0.03% to 23,428.07, the CAC-40 index edged higher 0.1% to 7,692.84, and the FTSE 100 index advanced 0.2% to 8,849.17.

The yield on 10-year German bonds inched higher to 2.54%, French bonds increased to 3.26%, the UK gilts moved down to 4.54%, and Italian bonds edged higher to 3.53%.

The euro increased to $1.15; the British pound was higher at $1.35; and the U.S. dollar was lower and traded at 81.66 Swiss cents.

Brent crude decreased $0.38 to $76.07 a barrel, and the Dutch TTF natural gas was higher by €0.44 to €39.67 per MWh.

 

Europe Stock Movers

BP plc edged up 0.5% to 391.25 pence, Shell PLC inched up 0.6% to 2,679.0 pence, and TotalEnergies SE gained 0.5% to €55.58. 

Volkswagen AG decreased 0.5% to €89.25, Daimler Truck Holding AG declined 1.3% to €38.10, Mercedes-Benz Group fell 0.5% to €49.25, Bayerische Motoren Werke AG fell 0.4% to €73.14, and Renault SA dropped 1.1% to €38.56.