Brexit fears sink the Pound
Last week saw Sterling decline against all its major peers as the uncertainty of the UK’s inclusion with the EU, took center stage. PM David Cameron, announced that the EU referendum vote will be on 23rd June. Cameron already has seen Boris Johnson Mayor of London, publicly dissenting against the PM showing his support for a vote out of the EU. This divide in the Conservative Party about whether to stay in or to exit the EU has seen the Pound fall to a seven year low against the Greenback, as well as dropping to 14 month lows against the Euro.
The week ended with a better than expected figure for the US growth in Q4 for 2015. Forecasted to drop to 0.4% from the first reading of 0.7%, however the second reading posted a solid 1% and as a result saw the Greenback gain against its major peers. A rate increase which has been played down so far could now be at the forefront with this bullish reading.
Over the weekend, Asian stocks continued its demise and the Yen strengthened against the majority of its counter-parties after G20 finance chiefs made only vague commitments to spur growth at the Shanghai meeting. The Yen added to its biggest monthly gain since 2008, while China’s Yuan declined for a seventh consecutive day. Weakness in Chinese stocks and also the Yuan is spurring risk-off sentiment boosting demand for safe haven currencies like the Japanese Yen.
An insight into the Euro zones Inflation figure will be seen as the y/y gauge is released this morning. With Mario Draghi head of the ECB, already outlining that the next meeting could see them pull the trigger on more stimulus measures to tackle inflation, this figure will be watched for today. From the US, the Chicago PMI is posted and forecasted to drop to 52.1.
- Euro – CPI y/y
- US Chicago PMI
Manufacturing across the globe will dominate headlines today. China who are a manufacturing led economy will probably have the biggest market reaction to their release. Last month’s figure fell just short of the key 50 mark at 49.4. Anything above the 50 level indicates expansion and below contraction. UK and US Manufacturing follow in the European session, both forecast to remain in expansion.
- China Manufacturing PMI
- UK Manufacturing PMI
- US ISM Manufacturing PMI
Two key economic indicators are due for release today, one for the UK and one for the US. Focusing on the UK’s number we have the PMI construction set for release. Meanwhile, we also get an early indication of how the all-important jobs report on Friday could look with the release of ADP Employment Report.
- UK Construction PMI
- US ADP Non-Farm Pay rolls
The biggest day in the calendar this week for the UK economy as the UK services PMI is released. The service sector makes up roughly 70% of the UK’s economy and therefore this figure will be heavily scrutinised. Also due to hit the wires is the ISM Non-Manufacturing Index.
- UK Services PMI
- US ISM Non-Manufacturing PMI
In terms of data this is a key day for the US interest rate hawks. The closely watched job numbers are set for release today. Last month we saw payrolls fall to 151k and the unemployment rate fall as well to 4.9%, a near 8 year low. Whilst we are expecting the figure to be as high as last month, a positive number could put a Q2 rate hike back on the table
- US Non-Farm Pay rolls
- US Average Hourly Earnings
- US Unemployment Rate