News & analysis


Sterling has opened the week on a positive note, notably already extending Friday’s two-week high against the dollar. Today marks the modest easing of lockdown restrictions throughout the UK, as well as the fourth week of Brexit negotiations between the UK and EU. The previous rounds of talks showed little progress made by the two nations. EU Chief Brexit negotiator Michel Barnier said in an interview with the Sunday Times newspaper that “the UK has taken three steps back from the commitments it originally made”, and added that the UK needs to be “more realistic” in its demands. Barnier remains confident that an agreement is possible, despite the slow progress so far. While tomorrow’s Brexit negotiations will be the key event of this week, markets turn their focus to today’s manufacturing Purchasing Managers’ Index for the UK. Any print below 50.0 represents a contraction in the sector, but nonetheless the forecast 40.7 print would be a slight uptick from last month’s 40.6.


The euro closed off its best week since mid-March on Friday, with the currency rallying to a two-month high, after European Commission President Ursula von der Leyen announced a proposal for an expanded recovery fund of €750bn, of which two-thirds are to be allotted in grants and one-third in loans. The stimulus fund has helped support the single currency since it was first announced, and the euro seemed unaffected by mixed eurozone inflation data on Friday. This morning, the euro extended its gains and reached fresh highs against the dollar amid broad US dollar weakness following an upbeat market mood. Despite Whit Monday being a bank holiday for many eurozone countries, today’s economic calendar for the region is packed with manufacturing Purchasing Managers’ Indices from Spain, Italy, France, Germany and the eurozone, all to be released throughout the morning. Thursday highlights this week’s main eurozone event as the European Central Bank will hold its next monetary policy meeting.


The dollar weakened for the third consecutive trading day and is already down against the whole G10 currency board this morning. The main trigger for markets moving out of the greenback and into other currencies comes from improved market confidence, after US President Donald Trump’s threats to China did not strike to the degree that markets had feared earlier last week. In his speech on Friday, Trump criticised Beijing for a proposal on new national security legislation in Hong Kong, but the speech included few specifics around the exact measures. The President promised sanctions against the Chinese officials directly or indirectly involved in Hong Kong’s autonomy but did not specify the individuals. He also stated that his actions will be “strong” and “meaningful”, but again did not identify the specifics. Headlines on the widespread riots in the US over the weekend following the killing of George Floyd added to the already hectic political landscape in the US, with violence against minority populations claiming blame on the administration. Primary elections will be held in eight US states tomorrow after having been postponed repeatedly due to coronavirus. The elections will paint a picture of what democratic elections will look like in post-Covid times and ahead of November’s presidential election. Today’s substantial economic calendar includes the manufacturing Purchasing Managers’ Index at 14:45 BST and a bundle of ISM sentiment data releases regarding manufacturing, new orders and prices paid at 15:00 BST. Later this week, all eyes will be on US employment data for May which is scheduled for release on Friday.


The Canadian dollar strengthened over 1.5% over the course of last week as USDCAD broke out from its recent range. Upon opening this morning, the loonie saw another bout of strength on reports that the OPEC+ grouping will meet earlier than initially planned to discuss potential extensions on production cuts. The news had Brent prices jump over 6% at open compared to Friday’s close, while WTI is trading more mildly. Today is a light day for the Canadian economic calendar with the manufacturing Purchasing Managers’ Index at 14:30 BST being the main data release of note. All eyes are turned to the Bank of Canada monetary policy meeting on Wednesday and Canada’s employment data that will be released on Friday.



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