Sideways trade continues in the Dollar, with the US unit trading on the soft side on a rally in Asian currencies. Eur/Usd has been unable to press home its advantage, after the expected taking over as German Chancellor by Friedrich Merz was thrown into chaos, after he secured just 310 votes vs the 316 needed to become Chancellor, despite his coalition partners having a total of 328 seats. Bbg reports the setback has thrown Berlin's government quarter into chaos, with lawmakers and commentators unsure of the next steps, and has been celebrated by the rightist AfD. Under Germany's constitution, there is no limit to how many votes can be held, but ultimately if no absolute majority is reached then a candidate can be elected without one.

Meanwhile, the ECB's Stournaras remarked the Bank is set to carry on cutting interest rates, albeit on a meeting-to-meeting basis, while Panetta stated a new wave of protectionism could damage economies around the world.

The Caixin version of Chinese services and composite PMIs disappointed to the downside, the latter coming in at 51.1 in April vs 51.8 the month previous.

On the tariff front, Trump stated that he is willing to lower tariffs on China at some point because the levies now are so high that the world’s two largest economies have essentially stopped doing business with each other. Trump also remarked that his admin could strike trade deals with some countries as soon as this week, offering the prospect of relief for trading partners seeking to avoid higher US import duties.

Also overnight, US Treasury Secretary Scott Bessent touted America as the “premier destination” for global capital and argued that the Trump admin’s policies will solidify that position — countering the so-called sell US theme that panned out in April following Liberation Day.

The UK services PMI for April was confirmed at 49.0 just above the 48.9 flash and the details showed a distinct stagflationary leaning. The pace of the decline from March's reading of 52.5, was the reading's fastest decline since January 2023, but the vital sector's input cost pressures rose at their fastest rate since July 2023.

After yesterday's softer than expected Swiss CPI report for April, which saw the headline rate fall to zero on a y/y basis, added to expectations that the Swiss National Bank may take interest rates into negative territory next month, instead of waiting until September, the SNB President Schlegel stated that no-one likes negative interest rates, but if the central bank has to, they are prepared to do so again. Switzerland is facing a triple whammy from tariffs, the SNB Chair warned, before adding that the Swiss Franc has appreciated a lot.

Trade data from both the US and Canada for March is expected today and looks set to be distorted by business brought forward ahead of the tariffs announcements.

Meanwhile, a lot of focus will fall on today's meeting between Canadian PM Carney and US President Trump in the White House. Carney ran on a hard-line ticket against Trump and his threats to turn Canada into the 51st state of the US, so this is going to test all of Carney's diplomatic skills.

Carney has previously stated that the old relationship based on steadily increased integration is over and the question is now how are the two nations going to co-operate in the future and "where we in Canada will move on."

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