Dollar on the back foot

Political developments are driving markets at the moment as US president Trump is embroiled in further controversy, with the New York Times reporting that he asked the now sacked head of the FBI to shut down an investigation into his also sacked national security adviser’s ties with Russia

Reflecting this, the dollar is very much on the back foot, falling against the euro (to over $1.11, ironically a level last seen just before Trump’s election last November), sterling (to over $1.29) and the yen (to around Y112). European equity markets are opening weaker this morning,  while government bond yields in the core markets are lower

ECB member Smets says the Euro area economy has improved and the  risks to the growth outlook are now ‘certainty close to balance’, but that it is ‘too early to declare’ that inflation in the zone is converging durably to its target

The annual rate of headline inflation in the UK rose to 2.7% in April, a bit higher than the consensus expected, with the core rate (i.e. excluding energy and food prices) picking up also to 2.4%

Manufacturing output in the US rose strongly in April, which together with a rebound in retail sales in the same month points to a reacceleration in GDP growth in Q2 after a soft opening quarter to the year

Data due today include a labour market report in the UK and Euro area CPI