What’s been happening?

Pound Sterling – UK Markets 

The British pound posted modest gains against both the euro and pound sterling on Monday as the lack of Brexit headlines and macroeconomic data releases allowed the currency to stage a technical recovery ahead of tomorrow’s critical labour market data, which the BoE uses as the primary gauge of the economy. 

Commenting on reports from the weekend claiming that talks between Prime Minister Theresa May and opposition Labour party leader Jeremy Corbyn hit another stalemate, British Foreign Secretary Jeremy Hunt told reporters that talks with Labour were more constructive and detailed than people thought. Later in the day, PM May’s spokesman said there was no fixed timetable for talks with Labour and reiterated that no-deal preparations would continue regardless.

US Dollar – US Markets

The greenback stayed relatively calm for the majority of the day on Monday in the absence of significant macroeconomic data releases and rising moderately against its rivals on the back of upbeat data and Fed commentary. The Federal Reserve Bank of New York’s Empire State Manufacturing Index improved to 10.1 in April from 3.7 in March and surpassed the market expectation of 6. Despite that upbeat reading, however, the publication revealed that the six-month outlook continued to soften. “Optimism about the six-month outlook was much lower than last month. The index for future business conditions dropped seventeen points to 12.4—its lowest level in more than three years,” the NY Fed said.

Meanwhile, in an interview with CNBC, Chicago Fed President Charles Evans said that the economy was looking stronger in the first quarter than it did in December adding that inflation was a bit lower than he’d like to see. Commenting on the policy outlook, Evans stated that he’d like to see inflation rise before deciding on further rate hikes.  

Euro – European Markets

The shared currency closed the day virtually unchanged against the dollar and suffered modest losses vs the pound sterling. In its monthly report on Monday, Germany’s Bundesbank noted that the economy grew moderately in the first quarter of the year. “The underlying growth trend remains subdued,” Bundesbank added.

Over the weekend, European Central Bank (ECB) Governing Council member and Bank of France Head Villeroy de Galhau told French daily Le Figaro that the ECB’s monetary policy must remain accommodative amid a serious downturn worldwide. Speaking at a conference sponsored by the Paris Europlace New York, Villeroy reiterated the bank’s commitment to keeping the policy loose and said that the inflation was expected to continue to edge lower before recovering gradually.    

What’s coming up? 

UK: The UK’s Office for National Statistics will release the employment report on Tuesday, which will include ILO unemployment rate, claimant count change, and average earnings excluding/including bonuses.

US: The Fed will release industrial production and capacity utilization data. Dallas Fed President Kaplan is scheduled to deliver a speech later in the day.

EU: Construction output will be the only data featured in the European economic docket.