What’s been happening?

Pound Sterling – UK Markets 

The British pound struggled to find demand in the second half of the previous week despite the upbeat sales data and started the new week under modest pressure, waiting for the market action to return to normal after the Easter holiday. The UK’s Office for National Statistics on Thursday reported that retail sales increased by 1.1% on a monthly basis in March following February’s 0.6% growth and surpassed the market expectation for a decline of 0.3%. There were no other macroeconomic data releases on Friday nor Monday.

On Brexit-related headlines, The Sunday Times over the weekend reported that a top member of British Prime Minister Theresa May’s Conservative party will tell her this week that she must resign by the end of June or lawmaker will try to oust her.

US Dollar – US Markets

The data published by the U.S. Census Bureau on Thursday revealed that retail sales in the U.S. rose by an impressive 1.6% on a monthly basis in March to beat analysts’ estimate of +0.9. Additionally, weekly jobless claims dropped to its lowest level since 1969 at 192K. Boosted by these upbeat data, the US Dollar Index, which gauges the greenback’s value against a basket of six major currencies, rose to its highest level in more than two weeks. However, the IHS Markit’s advanced PMI report from the U.S. kept the currency’s gains limited. 

Although the Manufacturing PMI stayed unchanged at 52.4 in April, this reading fell short of the market expectation of 52.8. The Services PMI, meanwhile, slumped to 52.9 from 55.4 in March. Commenting on the data, “The US economy started the second quarter with its weakest expansion since mid-2016 as businesses reported a marked slowing in output, new orders and hiring,” Chris Williamson, Chief Business Economist at IHS Markit. Friday’s data further showed that housing starts and building permits fell by 0.3% and 1.7%, respectively, in March.

On Monday, the Chicago Fed announced that the National Activity Index improved to -0.15 in March from -0.31 in February but was largely ignored by the market participants. Finally, existing home sales contracted by 4.9% in March to fall short of the market expectation of -2.3%. Nevertheless, the dollar stayed relatively calm on Monday.

Euro – European Markets

The IHS Markit’s flash PMI data on Thursday reminded investors of the economic slowdown in the euro area and weighed heavily on the shared currency. Manufacturing PMI for the eurozone and Germany both stayed below the 50 thresholds to show that the contraction in this sector continued for the second straight month. Although the Services PMI readings improved in the same period to keep the Composite PMI above 50, markets stayed focused on the disappointing Manufacturing PMI figures. 

Assessing the data, “The eurozone economy started the second quarter on a disappointing footing, with the flash PMI falling to one of the lowest levels seen since 2014,” Chris Williamson said. “The data add to worries that the economy has failed to rebound with any conviction from one-off factors that dampened activity late last year, and continues to show only very modest growth in the face of headwinds from slower global demand growth and subdued economic sentiment.”

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK on Tuesday and the market will shift its attention to political headlines.

US: Housing Price Index, new home sales, and the Richmond Fed Manufacturing Index will be featured in the U.S. economic docket.

EU: The only data release from the euro area on Tuesday will be the European Commission’s Consumer Confidence Survey, which is expected to show a small improvement in the Consumer Confidence Index to -7.1 in April from -7.2.