Sterling welcomes back British market participants after a Bank holiday weekend. The pound continues to trade in flux after Friday’s surge in Brexit optimism following a hammer blow for the Conservative party in local elections, whilst PM May is under revived pressure from the backbench 1922 committee as cross-party talks continue behind the scenes. Rumours are doing the rounds that a concession on a customs arrangement isn’t enough for some senior Labour MP’s who are pushing for a ‘confirmatory ballot’. This, as you had rightly guessed, is indeed a Labour euphemism for “second referendum” as the party hides behind semantics to push their stance of a customs union and a second referendum. The Labour party is smelling a fractious Conservative party and know May’s chances of breaking the Brexit impasse lay predominantly in their hands.


The single currency ranked high on the G10 FX list yesterday after solid Retail Sales and a marginal upward adjustment on the Final Services Purchasing Manager Index offered proof of resilience in domestic demand. Retail Sales came in 0.1% higher than expected, keeping up with the 2.0% year on year growth run rate on Eurozone. The Final Services PMI came in at 52.8, above the 52.5 forecasted and higher than in December and January, but nevertheless lower than the 53.3 scores seen last month. Taken together, this suggests the slowdown in economic activity in the Eurozone services sector has bottomed out but does point to lower quarterly growth of the economy of around 0.2%. Last week’s strong Q1 Gross Domestic Product figures, however, showed economic surveys like the PMI may be overestimating weakness in the Eurozone economy, a narrative which at this moment still provides hope for a higher Q2 economic growth. Today at 10:00 BST we welcome the European Commission’s Economic Growth Forecast, which based on more than 140 indicators, should give us a well-informed view of how the Eurozone economy may develop in the short run.


The greenback was second only to the Japanese yen in the G10 FX hierarchy yesterday, after Donald Trump’s tweeting thumb quickly eradicated all calm on financial markets early in yesterday’s session with a message about fresh tariffs on Chinese exports sent Sunday late at night. This sent volatility in FX markets to the highest level in two weeks according to JPMorgan’s Global FX Volatility Index, although to put things in perspective, it continues to reside near five-year lows. Today sees the JOLTS Job Openings at 15:00 BST as the most important scheduled release for the day.


The loonie held up relatively well yesterday compared to its G10 compatriots following Trump’s tariff comments as oil clawed back some of its recent losses. Meanwhile, Bank of Canada Governor, Stephen Poloz, reiterated the central bank’s economic outlook stating the housing market remains solid and growth should return to the sector later this year. This is consistent with the BoC argument of a rebound in growth in the coming quarter.

FX Elsewhere

The Turkish lira was subject to another rapid sell-off yesterday after the Supreme Electoral Council voted 7-4 to cancel Istanbul’s mayoral election result. Ekrem Imamoglu of Turkey’s main opposition party CHP won the original vote by around 13,000 ballots in a historic loss for Erdogan’s party in the capital, but multiple recounts later a foul was called after some ballot box committees were improperly appointed. The next official election date for the capital is set for June 23rd. The decision on the date of the next election is contentious in itself, falling inside the prime holiday period. The debacle is far from over, and the swing of the political pendulum back towards a dictatorship doesn’t bode well for the lira as the unpredictability of such a regime rocks investor confidence.