The latest COT data released by the CFTC recorded a further increase in non-commercial short Sterling positions to near 70,000 contracts from below 59,000 previously and the largest short position since October 2019. UK markets were closed on Monday, but underlying Sterling sentiment remained notably fragile, especially given the slide on Wall Street seen on Friday and wider vulnerability surrounding risk appetite. The UK currency remains very sensitive to overall risk conditions. Sterling initially corrected to daily highs on Monday, but gradually lost ground amid the wider lack of fundamental support and a renewed slide in US equity markets. In this environment, it dipped back against the dollar at the European close while the Euro secured a net recovery after sharp losses on Friday.
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The headline Euro-zone CPI inflation rate increased to a record high of 7.5% for April from 7.4% previously and in line with consensus forecasts, while the underlying rate increased more than expected to a series-high of 3.5% from 2.9% in March. The Euro-zone PMI services-sector index was revised to a final 55.5 from the flash reading of 55.3. Euro-zone industrial sentiment retreated to 7.9 for April from 9.0 previously while the services-sector sentiment edged lower to 13.5 from 13.6 with both readings below consensus forecasts, although there was a net gain for the business climate index. Underlying confidence in the Euro-zone outlook remained fragile, especially with fears over an escalation in the Ukraine conflict. EU officials also continued to discuss energy policy with further pressure for an outright ban on Russian crude imports but failed to reach a consensus. The Euro was unable to hold initial gains on Monday and gradually drifted lower with strong pressure from overall yield spreads.
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14.00 Christine Lagarde Speech
The US ISM manufacturing index retreated to 55.4 for April from 57.1 in March which was significantly below consensus forecasts of 57.6 and the lowest reading since October 2020. There was a small net slowdown in the rate of growth in orders and production while employment growth slowed sharply. Order backlogs increased at a slower rate on the month and there was a slight easing in cost pressures with the prices index edging lower to 84.6 from 87.1 in March.
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