What’s been happening?

Pound Sterling – UK Markets 

The British pound posted modest recovery gains against the dollar but weakened vs the euro for the fifth straight day as the currency struggled to attract investors amid a lack of macroeconomic data releases and positive political developments in the UK.

Speaking to reporters on Thursday, the opposition Labour Party’s leader, Jeremy Corbyn, said that Prime Minister Theresa May’s government had not made a “big offer” yet in Brexit talks. "Its actually quite difficult negotiating with a disintegrating government, with cabinet ministers jockeying for succession rather than working for an agreement," he explained. Meanwhile, in an interview with the Evening Standard, Chancellor Philip Hammond said that the PM should step down once the House of Commons approves a Brexit deal and argued that she should be replaced as quickly as possible. 

US Dollar – US Markets

Fears over the U.S. and China failing to come up with a trade deal and the U.S. hiking the tariff rate to 25% from 10% on $200 billion worth of Chinese goods on Friday weighed on the market sentiment and caused the 10-year Treasury bond yield to drop the 3-month bond yield for the first time since early March to trigger a USD selloff. Before negotiations kicked off in Washington, President Trump told reporters that he received a letter from his counterpart Xi urging them to work together and added that Xi talked about an “excellent alternative” to the deal in the letter. 

Although the data published by the U.S. Census Bureau showed the trade deficit in March widened less than expected, it failed to help the greenback gather strength. Other data from the U.S. revealed that the Producer Price Index (PPI) and the core PPI in April stayed unchanged at 2.2% and 2.4%, respectively, on a yearly basis.   

Euro – European Markets

The shared currency rose to a fresh weekly high against the dollar and posted modest gains vs the pound sterling on Friday. However, the fact that there were no macroeconomic data releases or fundamental developments from the euro area suggested that the currency’s market valuation on Thursday was a reflection of the selling pressure surrounding its major rivals.

Commenting on the European Commission’s Spring 2019 Forecast, which showed that the Italian economy was expected to grow by 0.1% in 2019, Italian Prime Minister (PM) Giuseppe Conte argued that the EC’s forecasts on Italy were pessimistic.

What’s coming up? 

UK: The UK’s Office for National Statistics will publish its advanced Q1 GDP estimate on Friday. Furthermore, the ONS will release industrial production, manufacturing production, business investment, and trade balance figures.

US: The U.S. Bureau of Labor Statistics will release its inflation report, which is expected to show the core Consumer Price Index (CPI) rising to 2.1% on a yearly basis in April. 

EU: Trade balance data from Germany and industrial production from France will be featured in the European economic docket on Friday. Sabine Lautenschläger, a member of the European Central Bank's Executive Board, is scheduled to deliver a speech as well.