While European equities saw a weak session yesterday, US stocks gained broadly despite US presidential criticism on Amazon which weighed on the tech sector. The 10y UST yield rose whilst the USD came under renewed pressure as US-China trade tensions continued to escalate.
After China imposed of tariffs on 128 US products, the US provided details on 1,300 Chinese goods that could see a 25% tariff. Trade tensions heightened further as China’s Ministry of Commerce announced they would levy reciprocal tariffs.
In data yesterday, UK manufacturing PMIs came in slightly better than expected at 55.1, but manufacturing is at its weakest in a year suggesting that underlying momentum has eased. Focus turns to construction PMI data this morning, which is likely to have a limited effect on GBP in our view
Our traders currently see GBPUSD support at 1.3980 and resistance at 1.4100 ahead of 1.4250. EURGBP support comes in at 0.8700 ahead 0.8665, and resistance lies at 0.8800.
In Italy, President Mattarella starts his first round of government consultations today after the inconclusive result of March’s elections. Barclays Research expects that the negotiations “are likely to be difficult and could last several weeks”.
Focus today is also on euro area flash inflation data, which we expect to increase to 1.4% y/y from 1.1% y/y, and the US ISM non-manufacturing index which we expect to improve slightly after manufacturing moderated in March.