What’s been happening?

Pound Sterling – UK Markets 

The British pound struggled to find demand on Monday as investors are waiting for the UK’s governing Conservatives to announce the successor British Prime Minister Theresa May on Tuesday. Ahead of this critical event, the Confederation of British Industry published a business manifesto for the government. “Early signals matter. The UK is a fantastic place to do business but we must be honest - the reputation of our country has taken a dent in recent times. Our new Prime Minister has a real chance to inject a new lease of life into the UK economy and show the world we are open for investment,” said Carolyn Fairbairn, CBI Director-General.

Earlier in the day, the National Institute of Economic and Social Research (NIESR) noted that the British economy may have fallen into a technical recession, and further warned that there could be a severe downturn in the economy in case of a disorderly no-deal Brexit. 

On political headlines, Alan Duncan, the UK Foreign Office Minister, announced his resignation in a letter that read: “It is tragic that just when we could have been the dominant intellectual and political force throughout Europe, and beyond, we have to spend every day working beneath the dark cloud of Brexit.” Reporting on that development, BBC’s political editor Laura Kuenssberg said Duncan’s decision came with an aim to push for an emergency vote to test the new Prime Minister's majority. However, Speaker of the House of Commons John Bercow turned down Duncan's request.

US Dollar – US Markets

Ahead of this week’s critical macroeconomic data releases that could have an impact on the Federal Reserve’s monetary policy outlook, the dollar was able to post modest gains against its major rivals, allowing the US Dollar Index to close in the positive territory for the second straight day.

The only data from the U.S. on Monday showed that the National Activity Index published by the Federal Reserve Bank of Chicago improved to -0.02 in June but fell short of the market expectation of 0.1. “One of the four broad categories of indicators that make up the index increased from May, and two of the four categories made negative contributions to the index in June. The index’s three-month moving average, CFNAI-MA3, ticked up to –0.26 in June from –0.27 in May,” Chicago Fed said.

Earlier in the day, President Trump called upon the FOMC to not delay rate cuts. "It is far more costly for the Federal Reserve to cut deeper if the economy actually does, in the future, turn down! Very inexpensive, in fact productive, to move now," Trump tweeted out.

Euro – European Markets

The shared currency weakened slightly against the dollar but was able to rise against the pound sterling. However, ahead of the European Central Bank’s monetary policy meeting later this week, investors are staying on the sidelines, suggesting that the currency’s movement is mostly technical. 

In its monthly report on Monday, Germany’s Bundesbank noted that the economy may have contracted in the second quarter of the year amid uninspiring export numbers and the softening activity in the construction sector.

What’s coming up? 

UK: The Confederation of British Industry (CBI) will publish its Industrials Trends Survey (orders) on Tuesday. The minutes of the Bank of England Financial Policy Committee’s latest meeting will be released as well.

US: The U.S. economic docket will feature housing price index, existing home sales and the Richmond Fed’s Manufacturing Index.

EU: The European Commission will publish the Consumer Confidence data on Tuesday. The European Central Bank is scheduled to release the bank lending survey (BLS) for the euro area.