Political factors continued to dominate financial market headlines last week after the UK general election results were tallied. The loss of the Conservative’s majority in the lower house of UK Parliament could cause significant turmoil, with GBPUSD falling 300 pips before recovering modestly as a immediate kneejerk reaction to the “hung parliament.”
Staying in Europe, the latest Euro Area GDP results came in stronger than anticipated for the first quarter of 2017, with quarterly growth accelerating to 0.60% while annualized expansion climbed to 1.90%. Nevertheless, the European Central Bank refrained from adjusting monetary policy for the period, instead downgrading the inflation outlook.
The Reserve Bank of Australia also opted to leave interest rates unchanged at a record low 1.50%. Although the economy managed to avoid a recession, maintaining the non-recessionary streak, weak household spending and growth alongside gains in the housing market remain notable risk factors.
Shifting gears, China reported inflation and trade data, with the surplus rising month over month after import and export increases surpassed market expectations. While consumer price inflation managed to gain ground, producer price growth continued to decelerate.
Finally, Japanese GDP growth disappointed relative to forecasts after quarterly expansion was a tepid 0.30% and a more modest 1.30% pace of gains on an annualized basis.