Will Starmer face leadership challenge?

Good morning

Higher than expected US PPI numbers yesterday helped keep the US dollar towards the higher end of recent ranges.  The numbers go a long way to prove that energy price pressures are starting to feed through to other areas along the supply chain.  The US dollar had a small jolt higher but soon reverted to pre-release levels, GBPUSD and EURUSD have been stuck in pretty ranges, trading now 1.3515 and 1.1710, leaving GBPEUR 1.1540.  USDJPY is 157.90, there was a quick dip to 157.50 earlier this morning on hawkish comments from BoJs Masu after we almost hit 158.00 but there was no follow through and it didn’t take long to recover.

Trump arrived in China with his entourage of business heads from the US amid claims that Chinese firms are selling arms to Iran.  While those two leaders do their stuff, our own PM Starmer looks like he could face a leadership challenge from Wes Streeting, perhaps aided by Angela Rayner after she was cleared of wrongdoing by HMRC over her failure to pay the correct stamp duty.  Starmer has said infighting will not do any good for the Labour party and looks set to fight any challenge that comes his way.  UK gilts yields are still slipping from the highs seen earlier this week but remain elevated.

Meanwhile, UK GDP this morning was mildly better than expected with March showing a +0.3% against an expected -0.2%, the good news there partially offset but a revision lower to last months number.  Headline q/q was as expected at 0.6% while the y/y number was up at 1.1% from an expected 0.8%.  Before we get carried away with the better looking numbers, bear in mind that these come largely from pre-Iran war days and therefore should be viewed with some caution. 

Trump’s choice for next Fed chair, Kevin Warsh, has finally been voted in by the Senate to replace Powell.  The idea of Fed independence will be thrown wide open, it will be very interesting to see what Trump says should Warsh start voting for unchanged or higher rates.   

In football, Man CIty kept their title hopes alive with a 3-0 win over Crystal Palace, now two points behind Arsenal with just two matches to play.  City will be ruing that recent 3-3 draw with Everton and will be hoping Arsenal make an unlikely mistake in their last two matches against Burnley and Palace.  City have a tougher teat in their remaining matches agaisnt Bournemouth and Aston Villa, but their sights now must surely be on the FA cup final this Saturday against Chelsea. 

Have a great day…

-  10.15 ECBs Lagarde speaks

-  13.30 US retail sales, initial jobless claims

-  15.15 Feds Schmid speaks

-  16.15 BoEs Pill speaks

-  18.00 Feds Hammack speaks

-  22.45 Feds Williams speaks

-  23.30 NZ business PMI

-  00.00 Feds Barr speaks