Back to work after the long weekend, looking ahead to Fed and BoE rate announcements

Good morning

I hope you all enjoyed the long weekend.  It did get surprisingly chilly but remained dry other than a couple of small showers.  Got plenty of work done in the garden and the dog enjoyed a couple of pleasant decent walks, I even played a bit of golf for the first time in about ten months which wasn’t quite as disastrous as I feared it could be.  And of course the VE day celebrations made for quite an impressive viewing, along with a flypast that included an old Lancaster bomber together with Typhoons and F35 jet fighters.  A good opportunity to celebrate Europe’s victory over Nazi Germany back in May 1945.  All in all a pretty decent bank holiday.

To round things off, Spurs didn’t lose, although to be fair they were playing the only team below them who isn’t being relegated.  Arsenal lost, which means there is a very outside chance that Spurs make the Champions League by winning the Europa League, and Arsenal miss out if they don’t finish in the top five.  OK, it would be exceptionally unlikely and if I’m honest not really something Arsenal would deserve having spent most of the season in the top two.  Would be a bit funny though!

Turning to the markets, it was a pretty quiet day yesterday, we did get a better than expected US ISM services PMI reading that helped the US dollar higher, GBOUSD fell from its afternoon high of 1.3335 to a low around 1.3270, EURUSD saw a similar drop from 1.1360 to just below 1.1300, both pairs now off those lows at 1.3310 and 1.1330 respectively.

AUD has benefitted since the Aussie elections saw Albanese re-elected as PM in something of a landslide victory.  His left of centre Labour party defeated the Liberals-National coalition as many see Albanese as a safer pair of hands to guide the country through the difficult Trump-tariff era.   GBPAUD traded down to 2.0485, its lowest level for nearly one month and well below the highs above 2.1600 seen after Trump’s ‘Liberation Day’ tariff talk.   

Quite a bit if trade talk over the weekend, China has called on Japan and South Korea to work together against US tariffs.  Trump suggested he may lower tariffs on China as they are looking for a deal, although China haven’t said anything that supports this claim.  Some suggestion Trump will meet with Canada’s Mark Carney today.  Meanwhile Ford has said Trump’s action are likely to cut their earnings by around $1.5bn this year, quite a damning outlook given Trump has argued that his tariffs can only help the US.  Even if he is right, it will take quite some time for any benefits to be felt.

Not a particularly busy calendar today but this week does bring both the Fed and BoE rate meetings on Wednesday and Thursday.  Fed are expected to remain on hold, while we are likely to see a cut of 25bps from BoE to take rates to 4.25%.

Inter Milan play Barcelona this evening in the second leg of their Champions League semi-final, after a thrilling first leg that ended 3-3.  Looking forward to that, hoping it’ll live up to expectations.  It’ll be Arsenal’s turn tomorrow evening as they try to overturn a one goal deficit to PSG, and then Spurs, Man Utd and Chelsea look to retain their leads in their own European semi-finals.

Have a great day…

-  09.00 EU Composite PMI

-  10.00 EU PPI

-  14.00 BoEs Breeden speaks

-  15.00 CAD Ivey PMI

-  22.00 RBNZ financial stability report

-  23.45 NZ employment

Will we start seeing a slowdown in the US labour market?

Good morning

US and EU equities made small gains yesterday, while the US dollar gained into the London close, with GBPUSD trading down to 1.3260 and EURUSD to 1.1265.  The decent performance was in part down to a better than expected US ISM PMI reading.  Since then we’ve seen a bit of a reversal, with both pairs now 1.3315 and 1.1330 respectively, while futures pricing points to a firmer open for EU stocks.

EU are still lining up their trade proposal for the US, which is reported to increase EU purchases of US goods by some EUR50bn.  China meanwhile are said to be mulling over the idea of trade talks but are looking for US to reverse the unilateral tariffs they put in place.  I’m not sure this is quite as positive as some believe but for now the markets like the idea of China and US talking.  AUD has gained , GBPAUD now down at 2.0740, just 30 pips or so off the lows we’ve seen for the past month. 

Morgan Stanley has told its clients they expect BoE to cut rates by 25bps at each of the next five meetings which would leave rates at 3.25% by November.  They would prefer to see BoE act quicker and are even thinking a 50bps cut could be on the cards.  That’s a pretty dovish outlook, although GBP isnt paying a great deal of attention to the report.

Local elections have been held in many areas across the UK and results so far show Reform has made gains mostly at the expense of the Conservatives although Labour have also lost 13 councillors.  The public is sending a message, let’s see how the Labour government react.

This morning we have the latest EU inflation numbers, but the key for the day will be US nonfarm payrolls this afternoon.  Markets are still looking for signs of a slowdown in the US labour market, expectations are for a headline around the +130k area compared to +228k last month, although I have seen some forecasts as low as +50k this time. 

Spurs, Man Utd and Chelsea all won their European semi-finals last night with comfortable enough margins to be reasonably confident for the second legs.  Premier league action this weekend, with only four matches left this season it’s going to be a race for the teams near the top to see who gets the coveted Champions League places next season.   

The Championship title will be decided this weekend, Leeds will be confident of beating Plymouth Argyle and if they do so the title is theirs.  Second place Burnley will be hoping Leeds slip up, but do face a tougher test themselves against Millwall who are battling for a place in the promotion play offs along with four other teams. 

F1 action returns this weekend as the teams head to Miami.  The McLarens will be hoping to extend their leads in both the drivers and constructors tables, while  Lewis Hamilton will be looking for something better from his Ferrari.

It was an absolute scorcher of a day yesterday, it’ll be slightly cooler today and we’ll be back to the mid-teens on Sunday and next week which is a bit of a disappointment but rather typical given it’s a UK bank holiday.  I hope you managed to enjoy some of the sunshine while it was here. 

So it’s a long weekend for us in the UK.  Next week brings US ISM services PMI on Monday, we’ll keep half an eye on that and we’re available should you need anything, but the key events will be the Fed rate meeting on Wednesday and the BoE rate meeting on Thursday. 

Have a great weekend as and when it comes,

-  09.00 ECB economic bulletin

-  10.00 EU HICP, unemployment

-  13.30 US nonfarm payrolls

-  15.00 US factory orders

US economy contracts but Trump blames Biden

Good morning

Welcome to May.  We’re already one third of the way through the year and I feel it has come and gone very quickly.  Not everyone agrees but for me seems to be just flying by.  I must be having fun!

US and EU stocks ended a touch higher having been in negative territory for much of the day, as US Q1 GDP fell to -0.3%, the first contraction in the US economy since 2022.   Trump won’t be happy it comes on his watch although he’s already blamed Biden and whatever he did or didn’t do during his tenure.   

We’ve seen a stronger US dollar through yesterday and again this morning, GBPUSD currently down at 1.3275 and EURUSD is at 1.1290.  USDJPY has traded higher partly down to the stronger USD but also a dovish BoJ meeting, where they kept rates unchanged but lowered growth and inflation forecasts and warning of further risks to both.  USDJPY has traded from below 143.00 up to 144.75.  GBPJPY just around 192.00.    

On US trade talks, there are reports that EU ar preparing to present proposals to the US next week.  China says US has reached out to them while Greer, the US Trace Rep has said no official talks are under way, both statements seem to undermine Trump’s suggestions last week that China have been in touch.  Trump has said there are potential deals with Japan, India and South Korea.

US have finally signed an agreement with Ukraine over access to natural resources.  Therer is some hope that this could ensure US remain at the negotiating table for peace although I fear Trump will now pressure Zelensky to give up all sorts of territory in order to allow the US to ransack, err I mean develop, Ukraine’s resources.  Still, I’d hope it acts as something of a deterrent to Putin.

Football fans were treated to a fantastic match between Barcelona and Inter Milan yesterday evening.  Inter had taken an early two goal lead, but the match ended 3-3.  Both sides were superb, the quality of football was exceptional.  The young superstar Yamal was playing his 100th match for Barcelona despite being just 17 years old.  Incredible.  I’m already looking forward to the second leg. 

Tonight sees one of the biggest matches in the European calendar, of course I refer to Spurs semi-final of te Europa League against Bodo/Glimt.  Man Utd will take on Bilbao, and Chelsea will hope their run of form in the Europa Conference League continues as they take on the mighty Djurgarden.  Meanwhile Forest will be hoping they beat Brentford this evening in their premier league fixture to take them back into the Champions League places.

Also in football, congratulations to Mark’s U14 Gurnard Comets team who finished third in their league and just five points off the top spot after a strong end to the season.  All bodes well for next season.

Today’s calendar brings more US jobs data this time in the form of Challenger job cuts and initial jobless claims, we’ll also have ISM manufacturing PMIs.  Aussie retail sales could offer some interest overnight, we’ll also be watching for any updated trade talk news from Trump.  Whether or not we believe it is another matter. 

-  12.30 US challenger job cuts

-  13.30 US initial jobless claims

-  14.30 CAD S&P manufacturing PMI

-  15.00 US ISM manufacturing PMI

-  23.45 NZ building permits

-  00.30 Japan unemployment

-  02.30 AUD retail sales, PPI