May’s day brings end to Mayday
Sterling saw no let-up in the volatility yesterday, with expectations of a UK rate cut causing a sell-off from market open. By about 9.30am the trading floors were abuzz with rumours that Andrea Leadsom would exit the Tory Party Leadership race, bringing forward the date of Theresa May’s succession to Prime Minister by about two months. With political leadership of the UK all but confirmed and a prolonged period of uncertainty avoided, the Sterling sell-off was curbed.
Today’s speech from Bank of England (BoE) Governor Carney will be forensically examined for any clues as to Thursday’s interest rate policy announcement. Having a UK Prime Minister installed by Wednesday may lessen immediate pressure for an early move to ease monetary policy. The British Retail Consortium reported the weakest sales figures since 2009 for June, although this was attributed to poor weather conditions rather than any referendum impact.
The US labour market conditions index continued to decline in June, although the rate of decline has eased after a much stronger figure for private payrolls in June. Kansas City Fed President George stated that keeping interest rates low could damage the economy adding that the current rates are too low given the recent economic progress. She also commented that the labour market was back on track, which suggests potential backing for a rate increase at this month’s meeting. There is no top tier US Data today.
Germany’s inflation data is released today – June Consumer Price Index & Wholesale Price Index. The Economic and Financial Affairs Council (Ecofin) meeting will likely see finance ministers discuss and waive fines for Spain and Portugal for not meeting budget targets. This is because Ecofin participants will most probably be keen to avoid stirring further EU resistance in member countries so soon after a Brexit.
Data to Watch: 7am German wholesale price index. German consumer price index. German harmonised index of consumer prices. 10am GBP BoE Governor Carney speech. 6pm USD 10 year note auction.