Sterling lost ground yesterday as rumours on the nature of the Royal announcement swirled. Sterling recovered with relief following news that Prince Philip would retire from public engagements.
UK service sector PMI‘s strengthened to 55.8 for April from 55.0 the previous month; the strongest reading for four months. With all PMI indices coming in above expectations for the month, data confidence in the UK economic outlook has improved. Mortgage approvals printed in line with forecasts but net lending was slightly stronger than expected.
The Euro attempted to break below 1.1765 while the UK currency regained the 1.2900 level against the Dollar, primarily due to US losses. Early local election results indicated a strong performance by the Conservative Party which reinforced expectations of a robust majority in the June 8 general election.
Eurozone services PMI for April was revised higher to 56.4 from 56.2 with the composite output index at a six-year high. The Italian index strengthened sharply to the highest level for close to ten years which bolstered confidence in conditions outside Germany and underpinned wider confidence in the Eurozone outlook.
Following the TV debate and latest opinion polls, markets remained convinced that Macron would beat Le Pen in Sunday’s Presidential election run-off and overall confidence in Eurozone assets strengthened which provided net Euro support.
A Macron win would likely result in a sharp appreciation of the Euro as the markets already expect the European Central Bank to taper or discuss tapering the Asset Purchase Program in June. A win for Le Pen would be a significant shock for the Euro.
US jobless claims declined to 238,000 in the latest week from 257,000 previously which maintained confidence in the employment outlook ahead of Friday’s employment report. There was a 3.0% increase in unit labour costs for the first quarter, maintaining expectations of higher inflation while the trade deficit was little changed at $43.7bn for March.
The Dollar was unable to gain further traction during US trading with the dollar index eventually declining over 0.6%.
The latest US employment data will spark short-term volatility, although the overall impact may be limited unless there is another weak report.
Data to watch:
1.30pm US Nonfarm Payrolls, Unemployment, Av Weekly Hours, Av Hourly Earnings, Labour Force Participation Rate. 3.30pm US Fed’s Stanley Fischer Speech. 4.45pm FOMC member Williams Speech. 5.30pm Fed’s Yellen Speech, Fed Evans Speech. 7pm Consumer Credit Change.
Posted in Daily Market News on May 5 2017