Sterling initially remained on the defensive after the latest UK jobs data with markets focussing on the decline in employment and increased labour supply. Sterling dipped to lows against the dollar before stabilising. There was some reassessment of the data with strength in wage increases maintaining expectations that the Bank of England would increase interest rates again. Sterling recovered ground and pushed to highs against the dollar before a fresh retreat as the dollar advanced. Comments from Bank of England Bailey will be monitored on Wednesday and Sterling was unable to make any headway with a drop against the dollar in early Europe as European currencies remained generally out of favour in global markets.
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10.50 Andrew Bailey Speech
The German ZEW economic sentiment index dipped to -10.7 for May from 4.1 previously and below expectations of -5.3. There was also a small decline in the current conditions component to -34.8 from -32.5, although this was slightly stronger than consensus forecasts. Euro-Zone GDP was confirmed at 0.1% for the first quarter of 2023 with a 1.3% annual increase. The Euro held firm into the US open, but only briefly moved above higher against the dollar before drifting lower again. The data overall maintained reservations over the Euro-Zone outlook after a run of generally disappointing data releases.
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Headline US retail sales increased 0.4% for April after a revised 0.7% decline the previous month and below expectations of 0.8%. Underlying sales also increased 0.4%, but met market expectations while the control group recorded a 0.7% monthly increase. US industrial production increased 0.5% for April compared with consensus forecasts of a marginal decline while manufacturing output increased 1.0% on the month. The NAHB housing index recovered further to 50 for May from 45 previously and above expectations of 45. Cleveland Fed President Mester stated that she doesn’t think the central bank is at a spot to hold rates yet. She added that rates are not restrictive enough and that she is not at a point where it is equally probable that the next move in rates is for an increase or decrease.
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