It’s a knockout!
The Pound experienced choppy trading conditions on Friday, especially around the widely expected resignation announcement from Theresa May. The PM will stand down on June 7th following widespread condemnation of her latest Withdrawal Plan proposals and the markets brace for more volatility and political uncertainty and as we draw closer to a no-deal exit. Retail sales for May fell at its fastest pace since October 2017 according to the latest CBI survey and businesses are putting investment plans on ice until the Brexit outcome is clear.
Sunday saw the publication of the European election results, where domestically the Conservatives and Labour party lost a considerable amount of support to the Brexit Party and Liberal Democrats. Despite the Leave and Remain both claiming a win, the result exerted downward pressure on the Pound as it highlights the risk of no-deal Brexit. Due to the Bank holiday, the effect was muted and could well be felt in force today. The UK Inflation Report Hearings are slated for midday, and Sterling opens at 1.1344 on the Euro, and 1.2688 on the Dollar.
The US Dollar index is up for the second session in a row amidst persistent trade fears and the mild bias towards the risk-off trade, while US markets are slowing resuming the activity following yesterdays Memorial Day holiday.
In fact, trade concerns have resurfaced after President Trump hinted at the likeliness that further and higher tariffs could be in the pipeline, reiterating that there is no rush to clinch a deal with China.
US President Donald Trump continues his visit to Japan and has repeated his stance that the US is not ready to make a deal with China just yet. The trade war persists but has not intensified in recent days — the US has not imposed new tariffs. Markets continue watching every development.
The highlight on the economic calendar is the US Conference Board’s consumer confidence measure, which is expected to remain on high ground.
Trading was slightly muted on Monday, as the results from the EU elections came in. In a slight shock, Euro-skeptic parties did not do as well as many thought they would. Pro-EU parties managed to retain roughly two-thirds of the seats. This positivity was offset, however, by declining German bond yields and especially the ten-year Bund which fell to multi-year lows and exerted downward pressure on the single currency. Political uncertainty is still prevalent, especially within the UK, as fears grow that a no deal is looking increasingly likely. Versus the Pound, the Euro performed comparatively well, but this was due to a weakening Pound as opposed to Euro strength.
Data today consists of Swiss GDP, German consumer confidence, Swiss imports/exports, French consumer confidence and Italian trade balance numbers. There is the EU data, specifically private loans then the M3 money supply which is then swiftly followed by EU business climate data. As mentioned previously, political uncertainty will almost certainly create more volatility in the coming days.
Data to watch
05:45 CHF Gross Domestic Product (YoY) (Q1)
06:00 EUR Gfk Consumer Confidence Survey (Jun) (Germany)
09:00 EUR Business Climate (May)
13:00 USD S&P/Case-Shriller Home Prices Indices (YoY) (Mar)
14:00 USD Consumer Confidence
21:00 NZD RBNZ Financial Stability Report