he main composite index unexpectedly remained unchanged at 56.8, versus the 56.6 consensus, with impressive growth particularly noticeable in the German manufacturing and French services sectors in May. These numbers are fairly consistent with growth above the 2% level – very healthy by recent standards.

Ongoing concerns that Donald Trump will not be able to force through economic stimulus in the US kept the US Dollar on the back foot. The terrorist attack in Manchester briefly led to a flight to safe-havens, although the reaction was relatively mild as traders saw little in the way of long term geopolitical damage from the event.

Among emerging markets, the South African Rand firmed on rumours that the ANC party would discuss the removal of controversial leader Jacob Zuma. Rising oil prices also provided decent support for the heavily oil dependent Canadian Dollar and Russian Ruble ahead of a crucial OPEC meeting on Thursday.

President of the European Central Bank Mario Draghi will be speaking in Madrid this afternoon on the topic of financial stability. However, the primary focus will be on this evening’s Federal Reserve meeting minutes, even given their dated nature. Attention will be on the details regarding balance sheet runoff and whether the central bank will overlook the recent soft economic data in the US when deciding the pace and timing of interest rate hikes at the coming meetings. Elsewhere, the Bank of Canada will be announcing its interest rate decision this afternoon, although is almost certain to keep rates unchanged and maintain its fairly cautious monetary policy stance.

Major currencies in detail

GBP

Sterling was range bound for much of the day on Tuesday, remaining pinned below the 1.30 level after the terrorist attack in Manchester roiled the markets during Asian trading.

The Pound has rallied hard on expectations for a comfortable Tory win at next month’s election. However, with the polls narrowing in the past few days there is now a chance that a less convincing than expected win could materialise, which would worsen Theresa May’s bargaining position with the EU and heap pressure on the UK currency.

With no economic news at all in the UK today, the Pound will largely be driven by election expectations and events elsewhere.

EUR

News out of the German economy on Tuesday provided additional reasons to be optimistic for the Eurozone economic outlook. Business confidence as measured by IFO far exceeded expectations. The business climate index rose to 114.6 versus the 113.2 consensus, while the expectations index climbed to an equally impressive 106.5 from 105.2. We’re starting to get more concrete signs of a rebound in economic activity in the currency bloc, and yesterday’s business confidence and PMIs were no exception.

German consumer confidence this morning is unlikely to rock the boat. Draghi this afternoon will be the main draw.

USD

The Dollar continued to struggle around a six month low against its major peers yesterday, with political risk continuing to weigh on the greenback.

Economic news out of the US was mixed on Tuesday. May’s services PMI came in above forecasts with the flash index rising to 54.0 from 53.1. Last month’s composite PMI also increased to 53.9 from 53.2, suggesting that the slowdown in the first quarter of 2017 was most likely temporary as the initial reaction had suggested.

Existing home sales will be released ahead of this evening’s Fed minutes. All eyes will be on the FOMC, although we think political developments continue to be the main driver.