What’s been happening?

Pound Sterling – UK Markets 

The British pound failed to take advantage of the improved market sentiment on Wednesday and dropped to its worst level vs the dollar in three months and continued to weaken against the euro.

Opposition Labour Party’s spokesman told reporters that gaps remained between them and the government in Brexit talks. “Without a compromise agreement, we would be voting on the same botched Brexit deal,” the spokesman added. Additionally, Brexit Secretary Barclay announced that the Brexit vote was planned to take place in the first week of June. When asked if he can absolutely say that a no-deal Brexit will not happen, Barclay said “no.” Regarding the possibility of the Brexit deal getting voted down in parliament, “if commons rejects it then the Barnier deal is dead,” Barclay stated. Later in the day, Prime Minister May reiterated that MPs have a duty in Parliament to deliver on the result of the referendum. 

US Dollar – US Markets

The data published by the U.S. Census Bureau on Wednesday revealed that retail sales declined by 0.2% on a monthly basis in April to miss the market expectation for a growth of 0.2%. Other data showed that industrial production in the same period contracted by 0.5% and the capacity utilization fell to 77.9% from 78.5 in March.

Later in the day, several news outlets reported that the Trump administration was planning to announce a 6-month delay to tariffs on European car imports. Although this development helped major equity indexes post strong gains, it failed to provide a boost to the greenback as the 10-year Treasury Bond yield failed to rebound from the 7-week low that it set earlier in the day. Many experts think that this move by the Trump administration suggests that they are preparing for a long-lasting trade war with China and are willing to remain focused on that front.   

Meanwhile, during a speech at an event organized by the New York Association of Business Economists in Manhattan, Richmond Fed President Thomas Barkin argued that there was not a strong case to move rates lower when the economic ”growth remains healthy.” Commenting on the inflation outlook, “inflation is running a little below our target, possibly due to transitory factors,” Barkin said to echo Chairman Powell’s comments from the monetary policy press conference.

Euro – European Markets

The shared currency took advantage of the easing concerns over the U.S.-Europe trade conflict. Today’s data from the euro area showed that the real gross domestic product (GDP) expanded by 0.4% and 1.2% on a quarterly and yearly basis, respectively, to match analysts forecasts. ”The number of employed persons increased by 0.3% in both the euro area and the EU28 in the first quarter of 2019, compared with the previous quarter. In the fourth quarter of 2018, employment had grown by 0.3% in the euro area and 0.2% in the EU28,” the Eurostat added in its press release.” On the other hand, the Q1 GDP growth in Germany weakened to 0.6% from 0.9% according to the Destatis’ advanced estimate. In the meantime, Italian Deputy Prime Minister (PM) Salvini criticized the EU’s fiscal rules by arguing that they were ”impoverishing the continent.”     

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK on Thursday.

US: Weekly jobless claims, housing starts and building permits data will be featured in the U.S. economic docket. 

EU: Trade balance from the euro area will be published on Thursday. Bundesbank President Weidmann is scheduled to deliver a speech as well.