US-China trade negotiators failed to secure a breakthrough on Friday and rhetoric was hawkish over the weekend.

US-China trade negotiators failed to secure a breakthrough on Friday and rhetoric was hawkish over the weekend, but talks did not collapse entirely.

Equity markets attempted to take a positive stance, but there were renewed losses on Monday amid fears over a protracted dispute and global economic damage.

The dollar was hampered by fresh concerns over the US growth outlook with an element of defensive Euro support underpinning EUR/USD.

The yen maintained a strong tone as defensive demand persisted while the Swiss franc also gained support.

Very strong employment data boosted the Canadian dollar, but commodity currencies lost ground on Monday.

Oil prices were resilient on supply concerns despite on-going demand concerns.

According to the ONS, UK first-quarter GDP growth was 0.5% which was in line with consensus forecasts as inventory building provided strong support. Industrial production data was stronger than expected with an annual increase of 2.6% for the manufacturing sector and investment posted a small increase for the quarter, but the data overall failed to spark Sterling support as international factors dominated.

There were further concerns that international trade tensions would undermine global growth and sap UK growth. The UK currency drifted lower and, significantly, failed to gain significant support even when risk appetite improved with a GBP/USD dip to the 1.3000 area while GBP/EUR advanced to around 1.1585.

Over the weekend, pressure increased on Prime Minister May to abandon talks with the Labour Party and calls for further indicative votes. Sterling was resilient in early Europe on Monday despite a risk-averse tone in global markets. Markets will continue to monitor Brexit developments with Labour Party talks set to resume and GBP/USD traded just above 1.3000.

Economic Calendar

14:10FOMC Member Richard Harris Clarida Speech
14:10FOMC Member Rosengren Speaks
18:20FOMC Robert Kaplan Speech
22:30BoC Governor Member Timothy Lane

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