Goldilocks labour market in the US

The main currency pairs were largely unchanged over last week as a whole, with the euro closing out Friday trading at just over $1.12 against the dollar and the pound ending at circa 86p and just over $1.30 against the single currency and the dollar respectively. Elsewhere, bond yields in the core markets backed up last week, with US 10-years yields (which rose for the first week in five) about 10bps higher at 2.50%, following some better than expected economic data most notably out of China. The latter drove equities on as well, with European and US stocks gaining around 2%

Friday‘s ‘payrolls’ report in the US points to a goldilocks labour market – not too hot and not too cold – leaving Fed interest rates firmly on hold. Employment rose by a very solid 196,000 in March with the unemployment rate unchanged at 3.8%, while the annual rate of growth in hourly earnings edged down to 3.2% from 3.4% in February

The May-Corbyn talks appear to be barely alive so it is unlikely a deal can be agreed and passed in the UK Parliament before Wednesday’s European Council summit. May has requested an extension of Article 50 to the end of June, but the indications are that the EU will offer a long extension, albeit a flexible one that will end if and when the UK parliament approves a deal

The ECB meets on Thursday with policy to remain on hold (given the Governing Council at its last meeting amended its forward guidance on interest rates and also announced a new round of longer-term loans for banks). The post meeting press conference may see some discussion of what more the ECB can do if the economy were to deteriorate, including whether it could cut the deposit rate (currently -0.40%) further into negative territory

Data due this week includes GDP in the UK and CPI inflation in the US, both on Wednesday