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UK unemployment dropped to 3.8% from 3.9%, a forty-five year low, although the underlying employment increase fell below consensus forecasts at 99,000. Average earnings growth slowed to 3.2% from 3.5% in March while average earnings including bonus slowed to 3.3% from 3.4%. The slowed pace of wage inflation was mildly negative for Sterling and further doubts arose of a Bank of England (BoE) rate hike this year. Even when global risk appetite improved the Pound failed to gain additional support. The Labour Party voiced concerns that the Conservative Party might later renege on deals made to break the immediate Brexit deadlock and Jeremy Corbyn called for further concessions. Market speculation that the talks could collapse in the near future, rose.
Theresa May stated that the Withdrawal Deal would see another vote in early June. Sterling dipped to lows near 1.2900 against the Dollar and the Euro pushed down to 1.1510 before correcting slightly, and the Pound remains little changed at market open today.
The US NFIB small-business confidence index strengthened to 103.5 from 101.8 previously with solid data on labour-market trends. Import prices data was weaker than expected with a 0.2% decline in the year to April from unchanged previously, dampening expectations of imported inflation pressures and agricultural prices declined sharply.
The greenback is making a timid recovery after touching a four-week low yesterday. Trade tensions went a notch higher after China retaliated against new US taxes with its own levies on US imports. Last Friday, the US Administration increased tariffs from 10% to 25% on about $200 billion worth of Chinese imports.
There is still hope that the officials from both sides will get the negotiations back on track, after taking this little detour. The currency market is maintained a cautious tone on the back of releases of bellwether Chinese data on investments, retail sales and unemployment.
Italian Deputy PM Salvini made a statement yesterday saying that the government was prepared to break EU budget rules and exceed the 3% budget deficit limit until unemployment is halved. This had a negative effect on the Euro, dropping to three-day lows versus the Dollar but then recovering slightly to around the 1.1200 level. The comments increased speculation over tension between Italy and the EU Commission and bonds slumped. The German ZEW index declined and came in well below consensus which also applied pressure on the single currency.
Data today is focussed on GDP numbers out of Germany and the EU. French CPI numbers and Italian industrial orders are also due but most volatility is expected to come from the GDP numbers. Later in the afternoon, the European Central Bank’s (ECB) Coeure and Praet will be giving speeches and the market will also be interested in developments in the trade war.
Data to watch
02:00 CNY NBS Press Conference
02:00 CNY Industrial Production (YoY) (Apr)
02:00 CNY Retail Sales (YoY) (Apr)
06:00 EUR Gross Domestic Product (YoY) (Q1) (Germany)
06:00 EUR Gross Domestic Product (QoQ) (Q1) (Germany)
06:00 EUR Gross Domestic Product w.d.a (YoY) (Q1) (Germany)
09:00 EUR Gross Domestic Product s.a. (QoQ) (Q1)
09:00 EUR Gross Domestic Product s.a (YoY) (Q1)
12:30 USD Retail Sales ex Autos (MoM) (Apr)
12:30 USD Retail Sales (MoM) (Apr)
12:30 USD Retail Sales Control Group (Apr)
12:30 CAD Consumer Price Index (MoM) (Apr)
12:30 CAD BoC Consumer Price Index Core (MoM) (Apr)
12:30 CAD BoC Consumer Price Index Core (YoY) (Apr)
12:30 CAD Consumer Price Index – Core (MoM) (Apr)
12:30 CAD Consumer Price Index (YoY) (Apr)
13:15 USD Industrial Production (MoM) (Apr)
13:30 USD Fed’s Quarles speech
14:15 EUR ECB’s Coeure speech
16:30 EUR ECB’s Praet speech
23:50 JPY Foreign Bond Investment (May 10)
23:50 JPY Foreign Investment in Japan Stocks (May 10)