The euro continued its rally from May’s lows yesterday, which may begin concerning some ECB members if Monday’s Reuters “sources” story proves to be correct. Today may be the day in which we find out as a long list of ECB doves take to the wires, with Draghi scheduled at around 09:15 BST. Draghi should show some concern over the market’s inflation expectations with the 5-year inflation-linked swap touching fresh lows at the beginning of the week. The European Central Bank could start lagging the Federal Reserve’s dovish stance in an attempt to depress the euro and spur on growth and inflation. The signs are positive for this narrative playing out thus far with monetary policy back in scope for the single currency.


Sterling rallied off the back of strong labour market data for April yesterday with wages growing at the fastest pace since May 2008 in one month. The data was bolstered by strong public sector wage growth which came in at 1.9% for the month of April, while April’s 4.9% increase in national living wage is likely to have also played a part. Regardless, the positivity of the data rubbed off on sterling. Throughout most of yesterday morning, sterling was the only G10 currency to be in the green against a resurgent dollar. This morning, Boris Johnson launches his leadership campaign just prior to Prime Minister Questions at noon, after which Politico reports Labour will attempt to take control of the order paper to block a no-deal Brexit. If this occurs, the Johnson campaign could suffer a substantial blow only hours after it officially began.


Theresa May’s legacy lives on, albeit in China. South China Morning Post has sourced officials stating that “no deal is better than a bad deal” as the gap between both sides begins to widen yet again. Trump added a fresh layer of uncertainty to tensions that were previously awaiting the G20 meeting before potentially flaring up again when he said “It’s me right now that’s holding up the deal, and we’re going to either do a great deal with China or we’re not going to do a deal at all” prior to leaving for Iowa. The rhetoric proved enough to push front-end yields higher despite calls for rate cuts from the Federal Reserve. Central Bank doves found another data point in their favour yesterday as the US Producer Price Index of inflation showed the prices of goods were falling while there were signs of upwards pressure in services. Today the consumer measure of inflation is released for May at 13:30 BST. Although CPI is not the Fed’s favoured measure of inflation, with speculation rife over next week’s FOMC meeting, the data release will likely have increased market attention.


The loonie has started this morning’s European session on the back foot along with oil prices. Both currency and commodity are on track to post three days of losses should the Department of Energy inventory release show a further build in stockpiles at 15:30, especially after last night’s API report showed US crude stockpiles rose by 4.85m barrels last week.