Euro advances further

The euro has built on its gains from Friday against the dollar and sterling to trade at around $1.10 (back to where it traded briefly immediately following the result of the French election) and 85p respectively

The market is focusing on the upcoming ECB meeting in June and the possibility of a change in its assessment of the outlook for growth in the Euro area. Indications from the Bank’s Chief Economist, Praet, yesterday suggest it will conclude that the risks are balanced, having been ‘titled to the downside’ up to now, with such a change also possibly a precursor to the ECB later in the year announcing a scaling back of the pace of its monthly asset purchases.  All of which is currently supporting the single currency on the foreign exchange markets

US stocks started the week on a positive note, with the main indices gaining around 0.5% and the S&P 500 setting a new all-time high in the process. Bond yields in the US nudged higher, as did those in Germany and the UK, while Brent crude oil prices have rebounded further to over $52 p/b

CPI data due in the UK today are expected to show the annual inflation rate rose to a near 4-year high of 2.6% in April, according to the consensus forecast, while the Bank of England’s latest forecast envisage it rising to almost 3% over the coming months. A continuing rise in inflation will further erode households real incomes and hence dampen their spending

Other data scheduled for release include a second estimate of Euro area GDP growth in Q1 and industrial production and housing starts in the US