What’s been happening?

Pound Sterling – UK Markets 

The British pound rose against the dollar on Monday but struggled to gather strength against the euro as the currency reacted to latest Brexit developments in the absence of macroeconomic data releases from the UK.

Earlier in the day, British Prime Minister Theresa May’s spokesman said that there were no scheduled talks between the PM and Labour party leader Jeremy Corbyn while reiterating that the government was hoping to introduce the latest version of the withdrawal agreement as soon as possible. Furthermore, several news outlets reported that Brexit was taken off from this week’s parliament agenda to hint at the lack of progress in cross-party talks. However, reports of an improved tone in the latest talks between the government and the Labour party later in the evening helped the pound sterling gather some strength against its major rivals. 

US Dollar – US Markets

The greenback weakened against both the pound sterling and the euro on Monday as investors continue to reposition themselves ahead of this week’s critical FOMC meeting. 

The U.S. Bureau of Economic Analysis in its latest publication reported that the core Personal Consumption Expenditures Price Index, the Fed’s preferred gauge of inflation, edged lower to 1.6% on a yearly basis in March and fell short of the market expectation of 1.7% while moving further away from the Fed’s target of 2%. Although this data weighed on the currency as it suggests that the Fed is unlikely to make a hawkish shift in its outlook amid soft inflation growth, further details of the BEA’s report helped the US Dollar Index limit its losses. With a monthly increase of 0.9% in March, consumer spending grew at its strongest pace since 2019. 

Other data from the U.S. revealed that the manufacturing sector in the Texas area lost momentum with the Dallas Fed Manufacturing Index falling to in April from 6.9 in March and missing analyst’ estimate of 10 by a wide margin.

Euro – European Markets

The shared currency rose vs the dollar and the pound sterling on Monday despite the mixed sentiment data from the euro area. The European Commission on reported that the Consumer Confidence Index in April fell to -7.9 from -7.2 in March while Economic Sentiment Indicator eased to 104 from 105.6 and Industrial Confidence Index slumped to -4.1 from -1.6. The Services Sentiment Index was the only component of the report that stayed unchanged in April. 

“The deterioration of euro-area sentiment resulted from lower confidence in the industry, retail trade and, to a lesser extent, in construction and among consumers, while confidence remained unchanged in services,” the EC noted in its press release. “Selling price expectations increased slightly in retail trade, while they decreased markedly in industry and construction and remained virtually stable in services. Also, consumer price expectations dropped in April.”

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK but following today’s headlines, markets will be paying close attention to political developments.

US: The ISM Chicago PMI, S&P/Case-Shiller Home Price Index, the Conference Board Consumer Confidence, and pending home sales will be featured in the U.S. economic docket on Tuesday. However, ahead of Wednesday’s critical FOMC announcements, the greenback is unlikely to pay attention to these data.

EU: The Eurostat will release unemployment and first-quarter GDP growth data for the euro area on Tuesday. Additionally, Germany’s Destatis will publish inflation, unemployment, and import price index figures.