What’s been happening?

Pound Sterling – UK Markets 

The British pound fell to its lowest level in nearly two months against the euro and posted losses vs the dollar on Tuesday hurt by the mixed jobs report and Brexit headlines suggesting that the government and the opposition Labour Party is struggling to find common ground in Brexit talks.

The UK’s Office for National Statistics on Tuesday announced that the unemployment rate in March fell to its lowest level since December 1974 at 3.8%. However, claimant count change rose to 24.7K in the same period to come in slightly worse than the market expectation of 24.2K. Additionally, wage inflation on a yearly basis fell short of analysts’ estimate of 3.4%. “Including bonuses, average weekly earnings for employees in Great Britain were estimated to have increased by 3.2%, before adjusting for inflation, and by 1.3%, after adjusting for inflation, compared with a year earlier,” the ONS said.

Later in the day, opposition Labour Party's finance policy chief McDonnell told reporters that they had not seen a shift from Prime Minister Theresa May's government in talks aimed at breaking the Brexit deadlock and reiterated that the customs union was "absolutely" key for them. Meanwhile, during a speech delivered at a Wall Street Journal Conference on Tuesday, Foreign Secretary Hunt that it was in both parties' interest to reach a Brexit deal as the failure to do so would cause them to get “crucified” at a general election.

US Dollar – US Markets

With U.S. President Trump delivering some optimistic remarks on the trade dispute, the 10-year Treasury Bond yield rebounded from its multi-month lows set yesterday and helped the greenback outperform its rivals.

“When the time is right we will make a deal with China,” Trump said. “We have to be allowed to make up some of the tremendous ground we have lost to China on Trade since the ridiculous one-sided formation of the WTO. It will all happen, and much faster than people think!”

The only data from the U.S. today revealed that import prices and export prices both rose 0.2% on a monthly basis in April but was largely ignored by the market participants. The US Dollar Index, which tracks the dollar’s value against a basket of six major currencies, rose above 97.50 to erase the losses it suffered yesterday and on Friday. 

Euro – European Markets

The shared currency weakened against the dollar on Tuesday amid disappointing sentiment data. The ZEW Survey revealed that the Economic Sentiment in Germany dropped -2.1 in May and to -1.6 in the eurozone. Although the Current Situation in Germany improved to 8.2 from 5.5 in April, it failed to help the shared currency. Commenting on the data, "The decline in the ZEW Indicator of Economic Sentiment shows that the financial market experts continue to expect restrained economic growth in Germany for the next six months," said ZEW President Professor Achim Wambach. "The most recent escalation in the trade dispute between the USA and China again increases the uncertainty regarding German exports – a key factor for the growth of the gross domestic product.”

Other data showed that industrial production in the euro area contracted by 0.3% on a monthly basis in March and the annual Consumer Price Index stayed unchanged at 2% in Germany on a yearly basis as expected.     

What’s coming up? 

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

US: The U.S. Census Bureau will release the retail sales data and the Federal Reserve Bank of New York will publish the Empire State Manufacturing Survey. 

EU: First-quarter GDP growth data for the eurozone and Germany will be featured in the European docket on Wednesday.