Following a long weekend for both the UK and the US, markets started the new working week lethargically. The UK pound found itself on the ropes once again as George Osborne announced new austerity measures across seven Whitehall departments that will save the government approximately £11bn over the next 2 years.

Following the IMF’s recent ‘heath check’ of the UK economy where the resounding tone was that the UK’s austerity measures should perhaps be scaled back or at least the pace of the budget cuts slowed, this most recent announcement could be construed as bad timing at best.

Following a long weekend for both the UK and the US, markets started the new working week lethargically. The UK pound found itself on the ropes once again as George Osborne announced new austerity measures across seven Whitehall departments that will save the government approximately £11bn over the next 2 years.

Following the IMF’s recent ‘heath check’ of the UK economy where the resounding tone was that the UK’s austerity measures should perhaps be scaled back or at least the pace of the budget cuts slowed, this most recent announcement could be construed as bad timing at best.

A lack of data on Tuesday from the UK left the door wide open for additional losses on GBPUSD as the US once again published better than forecasted data in the form of the consumer confidence figures. As a result GBPUSD weakened by 0.7 cents before hitting key support levels and bouncing back up. If we take the recent trend of US dollar strength moving in parallel with stock markets, new highs on the Dow Jones simply reiterate the risk appetite of global investors although the IMF has cut the forecasted growth for China.

Very little data from the UK in this week could see the dollar strength go unopposed. Now that we have tested another key support level, additional pressure to push lower well be on the horizon.

The euro zone has a packed calendar today with German jobs figures, inflation and economic outlook all due. Recent lows of the GBPEUR rate have been down to the levels that we saw on April 17th following almost a month of trading sideways. Today will be key in terms of a new trend for the euro as Germany continues to dominate the euro zone headline figures.

Later this afternoon, the Bank of Canada will publish their interest rate decision. The 1% base rate is expected to remain although alterations to their inflation targets may be on the cards.

Key Announcements:

08.55am – EUR – German Unemployment Rate (May): Came in as expected at 6.9%.

11.00am – GBP – CBI Distributive Trades Survey: Expected to improve to 3.

12.00pm – USD – MBA Mortgage Applications (May 24): Previously showed a fall of 9.8%.

13.00pm – EUR – Consumer Price Index (YoY) (May): Expected to improve to 1.3%.

13.55pm – USD – Redbook Index (YoY) (May): Previously showed an improvement of 2.4%.

15.00pm – CAD – BoC Interest Rate Decision and Statement: Expected to remain at 1%.

18.00pm – USD – Fed Reserve Bank of Boston President Rosengren Speech.