May turned out to be a decent month for the FTSE 100, with regular record highs and its best month this year, despite an underperforming commodities sector, and while US markets closed lower for the second day in succession, they also enjoyed a decent month, with new record highs on a regular basis, boosted mainly by the tech sector.

The one nagging worry for investors has been the low levels of volatility and it is something that saw US bank shares drop sharply yesterday, after two senior US investment bankers from JPMorgan and Bank of America warned of the effect it was having on their revenues and potential profitability. With the VIX still near multi-year lows, the scope for complacency remains quite high.

If the pound is a barometer of the prime minister Theresa May’s fortunes, it’s safe to say that the initial glow currency markets felt in the wake of the April election announcement is starting to wear off after the events of the last week or so. The bigger question as we head into the final days before next week's election is whether having chosen to miss out on last night’s so-called leader's debate, the wheels might come off further with respect to the UK economy.

There has certainly been some evidence that consumer spending has started to slow in recent months, despite an Easter rebound in April, as rising prices have pinched spending patterns, but the performance of the manufacturing sector has given cause for optimism in recent months. In April, the UK manufacturing sector rebounded strongly for its best performance in three years to 57.3, helped by a solid performance from new orders and output which saw new work rise at its fastest rate since January 2014.

With the latest European indicators showing continued resilience in their latest May numbers, there is a good chance that today’s UK manufacturing number for May will remain robust. Export orders were particularly strong in April due to the weaker pound and this is expected to continue, with expectations of a slight slowdown to 56.5.

Just before the UK numbers we get the final confirmations of the latest French and German manufacturing PMI readings for May, at 54 and 59.4 respectively, while Spain and Italy are also expected to post strong readings of 54.9 and 56.1 respectively.

In the US, last night's Fed’s Beige Book survey of economic conditions showed a US economy that, while not firing on all cylinders, appears robust enough to be able to absorb another rate rise in June, even if there were some weak spots on the eastern seaboard of New York, Chicago and Boston.

There does seem to be some concern about a slowdown in inflation but with unemployment at a 16-year low, there is some evidence of moderate upward pressure on wages. Today’s ADP payrolls report for May is expected to show that the economy added 181k jobs, more or less in line with April’s 177k. This would be the second conservative month of a sub-200k print after a really hot start to this year, which saw an average of around 250k jobs per month added in the first quarter.

The slowdown in manufacturing being seen in Q2 is also expected to be reinforced in the latest ISM manufacturing survey for May, which is expected to come in at 54.7, following on from yesterday’s weaker than expected Chicago number of 55.2.

Forex snapshot

EUR/USD – appears to have found support just above the 1.1100 area and looks set for a retest of the 1.1270 highs of last week, though we also have resistance at the November highs at 1.1300. While below 1.1270 we remain vulnerable to a drift back down to the 1.1020 area in the short term.

GBP/USD – the while we manage to stay above the 50 day MA and the 1.2750 support area the uptrend should remain intact and as such a retest of the 1.3040 area remains a possibility. A consolidated move through 1.3050 has the potential to target the 1.3320 area. Only a move below 1.2750 argues potentially back towards the 1.2600 area.

EUR/GBP – failed for the second time at the 0.8750 area yesterday, which could be a precursor to a drift back down. There is some support at the 0.8680 area which if broken could see a drift back down to the 200 day MA at 0.8600. While above the 0.8680 level the the risk remains for a move towards the March highs at 0.8790.

USD/JPY – continues to look soft with the 110.20 area a key support area. A move below here has the potential to see a move back to the 109.20 area. We need a move back through 111.60 to retarget the 112.40 area.

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Heightened market volatility is likely over the election period, which could result in widened spreads. We recommend that you monitor positions carefully, consider the use of appropriate risk management tools and maintain a sufficient account surplus throughout this period.

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