What’s been happening?

Pound Sterling – UK Markets 

With investors moving further away from risk-sensitive assets amid the escalating global geopolitical tensions, the British pound fell to its lowest level in two weeks against the dollar and suffered losses vs the euro for the seventh straight trading day.

Moreover, the lack of headlines pointing to a possible deal between the government and the opposition Labour party left the pound sterling at the mercy of the market sentiment. British Prime Minister Theresa May’s spokesman on Monday told reporters that cross-party talks were “serious on both sides” and reiterated that the PM was focused on delivering the outcome of the first referendum rather than the possibility of a second referendum. Meanwhile, British community minister Brokenshire said that it was possible to reach a Brexit agreement with Labour but was largely ignored by the market participants. 

US Dollar – US Markets

The greenback came under a renewed pressure amid a sharp drop witnessed in the Treasury bond yield after China announced its retaliatory measures to the U.S. tariff hike. In an official statement, China’s finance ministry said that it was planning to set import tariffs between 5% and 25% on more than 5,000 U.S. products worth nearly $60 billion and added that tariffs will go into effect June 1st. Commenting on the trade conflict, "tariffs put sand in the gears for U.S. companies," Dallas Fed President said.      

President Trump quickly reacted to this development by tweeting out that things would only get worse if China were to retaliate. "Many tariffed companies will be leaving China for Vietnam and other such countries in Asia. That’s why China wants to make a deal so badly!" Trump said in a Twitter thread. Later in the day, Trump told reporters that he hadn’t yet made a decision on introducing additional tariffs on $325 billion worth of Chinese goods and said that he was hoping to have a “fruitful” meeting with his counterpart Xi. 

Despite the initial negative reaction, however, the US Dollar Index, which tracks the greenback against a basket of six major currencies, recovered its losses in the second half of the day and closed the day flat.

Euro – European Markets

The shared currency finished the day virtually unchanged vs the greenback on Monday and rose vs the pound sterling. In the absence of macroeconomic data releases and significant fundamental developments in the euro area, the currency’s market action seemed to be a byproduct of shifts in the market’s risk perception. Although the euro seems to be a better alternative to the pound sterling in the risk-off environment, investors are refraining from making larget euro bets vs the dollar.     

What’s coming up? 

UK: The UK’s Office for National Statistics will release its jobs report on Tuesday, which will include the ILO unemployment rate, claimant count change, and average earnings including/excluding bonuses.

US: Import/export price index will be the only data release from the U.S. 

EU: The eurozone industrial production, Germany’s wholesale price index and consumer price index will be featured in the European economic docket. The ZEW Economic Sentiment Survey will also be looked upon for fresh impetus.