Subdued Start to the Week

FX markets started the week in quiet fashion, as a lack of major economic releases left geopolitical issues and risks front and centre.

Previous Day's Market Highlights

A fresh trading week began on a quiet tone in the FX market yesterday, with most majors failing to budge significantly from their opening levels throughout the day. The pound traded modestly weaker against the euro, hitting a fresh 4-month low at €1.1381, and unchanged against the dollar, having pared early gains as political headwinds remain stiff. Little in the way of concrete news broke on Monday, though markets still await the publication of the Brexit Withdrawal Agreement Bill, the legislation that would implement the Brexit deal, including the Prime Minister’s proposed “bold, new offer” - however the deal’s chances of passing still range from slim to none. The pound’s recent woes seem unlikely to fade soon, with continued political uncertainty in the shape of European elections and an imminent Conservative Party leadership election, in addition to a downside technical bias, likely to result in moves to the downside. 
Elsewhere, the euro ticked up by around 0.2% against the dollar, erasing Friday’s losses. The single currency’s gain seemed to have no specific catalyst though President Trump’s decision to delay the imposition of tariffs on auto imports has provided some relief. Meanwhile, the greenback lost a shade under 0.1% against a basket of peers, weighed down by both escalating US-China trade tensions in addition to lacklustre economic data. Trade tensions were ratcheted up further by President Trump effectively banning Huawei, a Chinese telecoms firm, from selling their products in the US. Though a 90-day waiver to the ban was later granted, this latest attack is a sign of further escalating tensions between the nations. Turning to economic data, releases were limited however the Chicago Fed’s national activity index, a useful barometer for the US economy as a whole, declined for a 4th consecutive month.
Overnight, the Aussie dollar has fallen by 0.5% after dovish comments from RBA Governor Lowe combined with dovish-sounding minutes from the RBA’s latest policy meeting to increase the chances of an imminent rate cut. Governor Lowe remarked in a speech that a rate cut would be considered at the RBA’s June meeting, stating that this would support employment and spur inflation. Further increasing the chances of a cut was the removal from the meeting minutes of there being “no strong case” for a near term policy shift, signalling to markets that rates may soon be altered. OIS markets now give a roughly 70% chance of a rate cut next month, compared to around 58% yesterday.
Away from FX, continued jitters over US-China trade weighed on global equity markets, with declines on both sides of the Atlantic. In Europe, the pan-continental Stoxx 600 fell 1.2%, while London’s FTSE 100 declined by 0.6%. Across the pond, the US benchmark S&P 500 fell by 0.67%. Finally, oil prices rose after OPEC signalled production cuts would be maintained, with rising tensions in Iran also raising supply concerns. Benchmark Brent traded 0.6% higher, while WTI gained 0.8%.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1395 1.1776 1.1381 3.35%
GBP/USD 1.2709 1.3176 1.2706 3.57%
EUR/USD 1.1150 1.1265 1.1110 1.38%
GBP/AUD 1.8475 1.8882 1.8240 3.40%
GBP/NZD 1.9525 2.0021 1.9340 3.40%
GBP/CAD 1.7060 1.7728 1.7055 3.80%

Today's Market Highlights

It may be another quiet day for markets today, with a rather barren economic calendar for the day ahead. Data is relatively limited, with just a couple of second-tier releases for markets to chew over throughout the European and North American trading sessions. In Europe, markets will focus on this afternoon’s preliminary consumer confidence figures for May, expected to show a moderate uptick to an index level of -7.6. Though this would show the index remaining firmly in pessimistic territory, any signs of data bottoming out in the eurozone are likely to be seized upon as a positive amid the bloc’s economic struggles. An increase in consumer confidence would likely result in increased consumer spending, boosting economic growth. 
From the US, markets will look to this afternoon’s existing home sales data for a gauge of the health of the housing market, especially due to the ripple effects a flourishing housing market has on the broader economy. Data is expected to show 5.33mln sales in April, a 2.6% increase from last month. A positive release may help the dollar find some near-term support, though focus will remain on ongoing trade tensions in the medium-term. For the pound, with nothing in the way of data due, focus will remain on any ongoing political developments. Today’s only other notable release comes overnight from New Zealand, where data is expected to show retail sales stagnating in the first quarter after a 1.7% increase in the final quarter of 2018. However, with the RBNZ having cut rates since the data was collected, the numbers should be taken with a pinch of salt when gauging consumer health. 
Once again, central bank speakers are likely to be of more interest than economic data today, primarily this morning’s scheduled Inflation Report Testimony from the Bank of England. Four BoE policymakers - Gov. Carney, Dep. Gov. Broadbent, Tenreyro and Sauders - are due to appear before the Treasury select committee, testifying on the recently-released Inflation Report. Any hawkish comments are likely to be of significant interest, especially after Carney’s comments that the market path of interest rates was too low at the BoE’s last policy meeting. Other notable speakers include dovish Fed voter Evans and hawkish Fed voter Rosengren this afternoon.

Today's Economic Calendar

Time Currency Release Consensus Previous
3:00pm USD Existing Home Sales (m/m - Apr) 5.33mln 5.21mln
3:00pm EUR Prelim. Consumer Confidence (May) -7.6 -7.9
11:45pm NZD Retail Sales (q/q - Q1) 0.0% 1.7%