Last week, Sterling remained resilient despite being under pressure. The topic of negative interest rates continues to dominate the market concerns for the UK. During a testimony to the Treasury Select Committee, Governor Bailey stated that the bank does not rule out any instrument in principle. Bailey stated that a move to negative interest rates was not ruled in or out and the evidence would have to be considered closely. This resulted in in the latest UK government 3-year bond auction recording a negative yield for the first time on record. This comes while in the US, the minutes from April’s Federal Reserve meeting reiterated that it was committed to using all available tools to support the economy but there was no support for negative interest rates.

Over the weekend and during the bank holiday (UK & US) on Monday we have seen several developments from the UK.  Focus was firmly on the actions and reactions of Government regarding Dominic Cummings. Many are still calling for his resignation so the pending pressure over the next few days could be interesting especially as the UK heads toward the deadline for an extension in trade talks at the end of June. During yesterday’s Covid-19 briefing, PM Johnson stipulated that non-essential shops in England can reopen from 15 June, rates of infection permitting. Outdoor markets and car showrooms can open from 1 June.

Yesterday with Europe open, we saw some more positive data from Germany. German business sentiment rose in May, beating forecasts as business expectations improved considerably, said the IFO Institute on Monday. There was a sharp rise in expectations (6-month view), a component that rose to 80.1 points in May from 69.4 points in April.


  • UK CBI retail survey
  • US Consumer confidence

The CBI retail survey will provide the first indications of consumer activity in May. The survey posted a record low in April, while a major rebound seems unlikely this month considering that restrictions have only been eased very gradually. In the US, consumer confidence is due. Confidence is expected to show a rise – reflecting the gradual reopening of the US economy.


  • EC release detail of EU Recovery fund
  • ECB President Lagarde speaks
  • Fed Beige Book

The European Commission will be unveiling its EU recovery fund to provide economic support for countries that have been affected by the coronavirus. In addition, ECB President Lagarde is due to speak about the ECB’s response to Covid-19 at the European Youth Event 2020. Her comments will be monitored for clues on future policy action from the ECB. The Fed’s Beige book is due for release after the European markets close which looks at evidence supplied by the 12 Federal Reserve banks reflecting how the economy is performing.


  • US GDP
  • US weekly jobless claims

The preliminary reading of US Q1 GDP showed the economy contracting by an annualised 4.8% – the biggest quarterly decline since 2008. The second estimate will include later data returns and could point to an even larger contraction due to the growing impact of the lockdown. Weekly jobless claims will be watched once again for further signs that the rise in unemployment may be peaking.


  • EZ inflation
  • US Inflation
  • US UoM consumer sentiment

Inflation will be the topic of the day as both the Eurozone and US post their respective readings. The Eurozone May ‘flash’ CPI report is forecasting a moderation in inflation, mainly on the back of weaker energy prices. The Fed’s preferred inflation measure, the PCE deflator is forecast to show an annual rise of only 0.4% in April. In the meantime, the UoM consumer sentiment will be monitored to see if there are any signs of improvement given the relaxing of lockdown restrictions.

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