The weather might look sunny but the pound is looking gloomy
There was a decline in net UK consumer lending to £4.3bn for April from £4.7bn the previous month as consumer credit growth slowed slightly and there was a decline in mortgage approvals. The data suggested a slight net slowdown in spending growth, although the political and technical factors dominated during the day.
Further election opinion polls suggesting a hung Parliament produced choppy trading conditions. Month-end position adjustment caused strong demand for the Pound amid high volatility. From lows around 1.2770, Sterling rallied to highs around 1.2920 against the Dollar while the Euro hit resistance on approach to 1.1430.
Another opinion poll suggesting a very narrow Conservative Party lead pushed Sterling lower on Thursday, with markets waiting for the latest PMI manufacturing data for further evidence on the economic outlook. Overall, political uncertainty was an important factor in curbing net currency support ahead of the June 8th election.
And if anyone spots Theresa, please tell her that Jeremy would like a chat?
The US Chicago PMI index was originally reported as having declined to 55.2 for May from 58.3 previously, but this was later corrected to show a significant increase to 59.4, the strongest reading since November 2014.
In contrast, there was a weaker than expected reading for pending home sales with a 1.3% decline for April, which maintained doubts surrounding the housing sector. However, issues were primarily related to supply rather than demand. The Fed’s Beige Book reported a further tightening of labour market conditions, but this report contained only limited evidence of upward pressure on earnings and little changed in pricing pressures.
German unemployment (change) figures dropped by 9,000 for May, although the retail sales data disappointed. Headline Eurozone inflation declined to 1.4% according to the May flash reading from 1.9% previously and below consensus forecasts of 1.5%. The core rate also declined to 0.9% from 1.2% previously. The weaker than expected data increased expectations that the European Central Bank (ECB) would be very cautious in removing monetary stimulus.
Eurozone unemployment declined to a fresh eight-year low of 9.3% for April, maintaining expectations of robust growth conditions. Bundesbank head Weidmann stated that the ECB should start to discuss whether and when to adjust forward guidance.
The Euro rallied to highs just above 1.1250 against the Dollar late in the European session and held a firm tone as the dollar index retreated close to six-month lows ahead of key releases over the next 36 hours.
Data to Watch:
6:45am EUR CHF Gross Domestic Product s.a. (QoQ) (YoY) (Q1).
8:15am EUR CHF Real Retail Sales.
8:55am EUR GER Markit Manufacturing PMI (May).
9:00am EUR ITL Gross Domestic Product (QoQ) (YoY) (Q1).
9:00am EUR Markit Manufacturing PMI (May).
9:30am GBP Markit Manufacturing PMI (May).
1:15pm USD ADP Employment Change (May).
1:30pm USD Initial Jobless Claims (May 26).
2:45pm USD Markit Manufacturing PMI (May).
3:00pm USD ISM Manufacturing PMI (May), ISM Prices Paid (May), Construction Spending (MoM) (Apr)