GBP

Sterling got a boost this morning from jobs data which showed the unemployment rate in the UK falling to its lowest level since 1974 in the first 3 months of the year. The jobless rate dropped to 3.7% from 3.8% and the 1.257mln people out of work was less than the 1.295mln job vacancies on offer for the first time on record. However, the data also showed that soaring inflation had led to the biggest annual fall in real earnings since 2013. The labour market strength comes despite the economy stagnating in February and March and the Bank of England has recently forecast that unemployment will rise as soaring energy prices sap consumer demand. Brexit news is likely to be the major headline today. While visiting local political leaders yesterday, Prime Minister Johnson said the government needed an “insurance” option to unilaterally scrap post-Brexit rules for Northern Ireland, adding that the EU must make concessions on the protocol to win over the province’s unionist community. This morning, Northern Ireland Secretary Brandon Lewis told Sky News that Foreign Secretary Liz Truss will today set out the next steps London is willing to take to tackle the trade issues.

EUR

The euro has found some demand against the dollar due to an improvement in market sentiment in early trading. Ahead of today’s Gross National Product figures for the bloc, the European Commission in their Spring growth forecasts yesterday, warned that under a severe scenario in which natural gas supplies from Russia were seriously restricted to the Union, economic growth would be whittled down to just 0.2% while consumer price inflation would exceed 9%. Yesterday, EU foreign ministers were unable to agree on a Russian oil import embargo, with Hungary, the Czech Republic and Slovakia being the main opponents.

USD

The dollar slipped against a basket of major currencies in early trading, hurt by improving risk optimism. The greenbacks fall came as Shanghai logged its third consecutive day with no new covid cases outside quarantine zones, a milestone that in other cities has signalled the beginning of the lifting of restrictions. Officials are now planning to start easing restrictions in a gradual way from 21/05 with an aim to have the lockdown completely lifted by 01/06. Retail Sales for April will be released later today and markets will be focused on Federal Reserve Bank Jerome Powell’s speech at an event organised by the Wall Street Journal for any changes in his stance on the central banks aggressive monetary tightening.

Economic Calendar

10:00 EUR Gross Domestic Product (QoQ)(Q1)
12:00 USD FED Bullard Speech
13:30 USD Retail Sales (MoM)(APR)
19:00 USD Fed Powell Speech