What’s been happening?

Pound Sterling – UK Markets 

The British pound failed to capitalize on upbeat GDP figures on Friday and closed the day slightly lower against both the dollar and the euro. According to the data published by the UK’s Office for National Statistics, gross domestic product (GDP) in volume terms was estimated to have increased by 0.5% in the first quarter of the year following the reading of 0.2% in the previous quarter and came in line with market expectations. “Private consumption, government consumption and gross capital formation contributed positively, while net trade contributed negatively to GDP growth,” the ONS explained in its publication. Commenting on the data, British finance minister Hammond said that the latest GDP data confirmed that the economy was robust. On Brexit, Hammond said getting rid of the PM Theresa May would not solve the Brexit impasse and argued that the problem was “parliamentary arithmetic.”

Other data on Friday revealed that the manufacturing production and the industrial production expanded by 0.9% and 0.7% on a monthly basis, respectively, in March. Finally, the ONS announced that the international trade deficit narrowed to £5.408 billion from £6.219 billion in February. 

US Dollar – US Markets

The U.S. Bureau of Labor Statistics on Friday reported that inflation, as measured by the Consumer Price Index (CPI), rose 0.3% from April to May to fall short of the market expectation of 0.4% and ticked up to 2% annually. The core CPI, which excludes volatile food and energy prices, came in at 0.1% and 2.1% on a monthly and yearly basis, respectively. The initial market reaction to the data weighed on the greenback and caused the US Dollar Index to close the day at fresh multi-week lows. 

Meanwhile, the latest round of trade talks in Washington on Friday didn’t produce any headlines suggesting further progress toward a deal. However, U.S. President Donald Trump’s tweets over the weekend failed to calm the markets down. “China felt they were being beaten so badly in the recent negotiation that they may as well wait around for the next election, 2020, to see if they could get lucky & have a Democrat win - in which case they would continue to rip-off the USA for $500 Billion a year,” Trump said.

While speaking at an event on Friday, Atlanta Fed President Raphael Bostic argued that the Fed might need to consider an interest rate cut if prolonged tariffs on Chinese imports were to hit consumer spending and weigh on the GDP growth. On the policy outlook, Bostic further reiterated that his base case scenario was for one rate hike in 2019. "But that is predicated on stronger inflation," he added.

Euro – European Markets

The data published by Destatis on Friday showed that the trade surplus in Germany widened to €20 billion in March from €18.7 billion in February and came in better than analysts’ estimate of €18.2 billion. A 1.5% growth in exports following February’s 1.2% contraction confirmed a healthy expansion in the trade surplus. On the other hand, industrial output in China declines by 0.9% in the same period.

Earlier in the day, European Central Bank (ECB) Governing Council member Ardo Hansson stated that there was no urgency to discuss the ECB’s policy review and argued that negative rate tearing could lead to “over-engineering” of the policy.

What’s coming up? 

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

US: Boston Fed President Eric Rosengren and Fed Vice Chair Richard Clarida will be delivering speeches on Monday. 

EU: There won’t be any macroeconomic data releases from the euro area.