UK labour market data weakens.

The New York Empire manufacturing index slumped to –31.8 for May from 10.8 previously and well below consensus forecasts of –3.7. There was a very sharp slide in new orders with sharp contraction on the month. There was a similar position for shipments while unfilled orders also dipped into contraction.

There was a slightly slower decline in the rate of employment while the inflation readings were little changed with a slightly stronger rate of increases in prices paid.

Companies were slightly more optimistic over the outlook while employment is expected to decline and inflation pressures are expected to ease slightly.

The EU Commission revised up the 2023 and 2024 GDP forecasts slightly with this year’s GDP growth forecasts revised to 1.1% from 0.9%. The 2023 inflation forecast was revised to 5.8% from 5.6% with the 2024 forecast at 2.8% from 2.5%.

Euro-Zone industrial production declined 4.1% for March after a 1.5% increase the previous month with a year-on-year decline of 1.4% from a 2.0% gain previously. The data maintained reservations surrounding the Euro-Zone outlook.

The German economy Ministry stated that the base growth dynamics of the economy had markedly weakened recently.

Bank of England chief economist Pill stated that the bank needed to guard against inflation sticking above 2% in a 4-5% range.

The latest UK labour-market data recorded a small increase in the unemployment rate and a sharp decline in employment for the month while the economic activity rate declined.

Headline wages growth edged higher to 6.7% from 6.6% with underlying growth unchanged at 5.8%.

The latest batch of Chinese data was weaker than expected with industrial production growth held at 5.6% in the year to April from 3.9% previously and below expectations of 10.9%. Retail sales growth surged to 18.4% from 10.6% previously, but below expectations of 22.0%.

The latest US retail sales data will be released on Tuesday. Consensus forecasts are for a headline increase of 0.8% and an underlying increase of 0.5%.

The Canadian consumer prices data will be released on Tuesday. Consensus forecasts are for the headline rate to decline to 4.1% from 4.3% with the core rate marginally higher at 4.4% from 4.3%.

The Euro edged higher on Monday but was unable to make significant headway amid growth reservations. The dollar was mixed with limited and recovered from net losses seen on Monday.  EUR/USD was held below the 1.0900 level and settled around 1.0870 on Tuesday.

Higher US yields undermined the yen. USD/JPY was, however, held below 136.50 and settled around 136.00.

The Swiss franc secured tentative net gains amid concerns over global growth. EUR/CHF retreated to 0.9740 with USD/CHF dipping to near 0.8950.

Sterling drew some support from relatively hawkish rhetoric from Bank of England Pill GBP/USD regained the 1.2500 level with EUR/GBP retreating to near 0.8680.  Sterling, however, dipped after the labour-market data with GBP/USD at 1.2475 and EUR/GBP back above the 0.8700 level.

Commodity currencies posted net gains in a correction from sharp losses late last week.  AUD/USD settled below 0.6700 on Tuesday from 0.6660 lows as the Chinese data dampened a recovery. USD/CAD retreated to 1.3470 as oil prices recovered before a rebound to 1.3490.

Economic Calendar

13:30Core Retail Sales m/m0.5%-0.8%
13:30Retail Sales m/m0.8%-1.0%

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