Unpopularity polling day
UK headline consumer inflation grew by 2.1% in April, up from March’s 1.9% but still short of the forecasted 2.2% growth. Core inflation was unchanged at 1.8%. Government borrowing printed lowest April deficit since 2007 at £5.8bn, marginally lower than figures for April last year. The data impact to the Pound was limited given the focus on the political circus and also had no effect on Bank of England (BoE) expectations.
Theresa May’s grasp on the premiership continued to deteriorate during the day with even stronger calls for her resignation given the hostility towards the latest Brexit proposals. Negative sentiment and Brexit fears prompted further Pound selling with the Euro strengthening beyond the 1.1365 level and the Dollar pushed to near 1.2625.
House of Commons leader and Angela Leadsom announced her resignation citing a lack of confidence Brexit would be delivered under Theresa May. The EU elections today will limit political activity but strong speculation that May’s resignation on Friday continues. Weaker risk conditions and the political chaos sap the Pound as it opens below 1.2650 against the Dollar and the Euro registered it’s 13th consecutive daily gain at 1.1323.
The Dollar continued to benefit from a lack of confidence in its peers, particularly the European currencies being undermined by political concerns and fears that uncertainty would further erode business confidence. The Fed’s policy meeting minutes revealed an overall preference for a patient approach on interest rates for the short to medium term even if global conditions keep improving, with only a few in favour of tightening policy if the economy evolves as expected. The views on inflation were mixed, but many considered that the recent dip would likely be short term. The currency effect was limited given that the meeting took place before US-China trade tensions blew up again.
European currencies were hampered by political concerns, with the general consensus being that uncertainty is not good for the region. With the EU elections happening across the region many feel that not much volatility will be seen until the results are more clear. The European Central Bank’s (ECB) President Draghi did not comment on monetary policy meaning the Euro remained flat. Any weaker than expected data today is expected to have minimal impact as the first quarter slowdown has been priced into the market.
German GDP data, Swiss industrial production and French business climate are due first up. This data is then followed by French markit manufacturing PMI and services PMI numbers. However, probably the most watched piece of data due out is the German manufacturing PMI figure and the equivalent for the Euro.
Data to watch:
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)
06:30 CHF Industrial Production (YoY) (Q1)
07:30 EUR Markit Manufacturing PMI (May) (Germany)
07:30 EUR Markit Services PMI (May) (Germany)
07:30 EUR Markit PMI Composite (May) (Germany)
08:00 EUR IFO – Expectations (May) (Germany)
08:00 EUR IFO – Current Assessment (May) (Germany)
08:00 EUR IFO – Business Climate (May) (Germany)
08:00 EUR Markit Manufacturing PMI (May)
08:00 EUR Markit Services PMI (May)
08:00 EUR Markit PMI Composite (May)
08:40 EUR ECB’s De Guindos speech
12:30 USD Continuing Jobless Claims (May 10)
12:30 USD Initial Jobless Claims (May 17)
13:45 USD Markit Manufacturing PMI (May)
13:45 USD Markit Services PMI (May)
13:45 USD Markit PMI Composite (May)
14:00 USD New Home Sales (MoM) (Apr)
17:00 USD Fed’s Kaplan speech
17:00 USD Fed’s Daly speech
17:00 USD Fed’s Bostic speech
22:45 NZD Trade Balance (YoY) (Apr)
22:45 NZD Exports (Apr)
22:45 NZD Imports (Apr)
23:30 JPY National CPI ex Food, Energy (YoY) (Apr)
23:30 JPY National CPI ex-Fresh Food (YoY) (Apr)
23:30 JPY National Consumer Price Index (YoY) (Apr)