Risk appetite deteriorated further on Monday as China retaliated with additional tariffs on US exports.

Risk appetite deteriorated further on Monday as China retaliated with additional tariffs on US exports. Global equity markets declined sharply as fear dominated.

The yen and Swiss franc gained additional safe-haven demand with USD/JPY at 3-month lows, although risk conditions stabilised to some extent on Tuesday as the yen pared gains.

Gold also moved sharply higher with 1-month highs around $1,300 per ounce. The dollar lost some ground overall given concerns over damage to the US economy with some EUR/USD support from short Euro covering.

Commodity currencies and Sterling were undermined by weaker risk conditions. Oil prices also reversed gains as risk fears offset underlying support from supply concerns.

Bank of England Deputy Governor Broadbent reiterated that any interest rate increases will be gradual which was in line with recent comments from officials. There were no substantive political developments during the day with pressure for Brexit talks between the government and Labour Party to be culled. Prime Minister May indicated that a series of indicative parliamentary votes could be held if talks fail to make headway. Overall, global trade issues and risk conditions dominated the UK currency.

Sterling was resilient during the European session, but there was significant selling in New York as global trade fears sapped confidence. The UK currency dipped to 2-week lows with GBP/USD below 1.2950 as GBP/EUR fell towards 1.1530.

Latest labour-market data will be released later, although risk conditions are likely to dominate unless there is a big surprise within the data and Sterling made no impression in early Europe as GBP/USD traded just above 1.2950.

Economic Calendar

07:00Germany Harmonised CPI (M/M)(APR)1.00%1.00%
07:00Germany Harmonised CPI (Y/Y)(APR)2.10%2.10%
07:00Germany CPI (Y/Y)(APR)2.00%2.00%
07:00Germany CPI (M/M)(APR)1.00%1.00%
07:30CHF PPI (M/M)(APR)-0.30%
07:30CHF PPI (Y/Y)(APR)--0.20%
08:15FOMC member John C. Williams speech--
09:30GBP Average Earning Including Bonus(MAR)3.50%3.50%
09:30GBP Claimant Count Change(M/M)(APR)20.0K28.3K
09:30GBP Unemployment Rate(MAR)-3.90%
10:00German ZEW Survey (Economic Sentiment)(M/M)(MAY)0.83.1
10:00German ZEW Survey (Current Situation) (MAY)-5.5
10:00Euro-Zone Industrial Production (Y/Y)(MAR)--0.30%
10:00Euro-Zone Industrial Production (M/M)(MAR)--0.20%
12:00OPEC Meeting--
13:30USD Export Price Index (M/M)(APR)0.20.7
13:30USD Import Price Index (M/M)(APR)0.40%0.60%
17:45FOMC Member George Speaks--

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.