Last week ended with the US labour data being the focus of the markets and the results showed that employment growth had slowed in April. The unemployment rate remained at 5% but as true to Wednesday’s ADP report, the main Non-Farm Employment figure also disappointed as the figure registered at 160k, falling short of the expected 200k mark. As a result of this poor data release, the Greenback saw initial weakness before regaining losses after the knee jerk reaction. The bigger picture for the Fed now is if talk of a rate raise anytime soon is still warranted, as the slowdown of employment and the economy is becoming more evident as the US start the second quarter.
This week starts off quietly with no high tier data releases today. This morning the markets have already seen China’s exports rising for a second month in a row. This shows that demand from overseas continues to increase at a modest pace from March to April for the world’s largest exporter. China’s Trade Balance reading was better than market consensus as a result, with the gauge increasing to 298bn against a forecast of 250bn. Eurogroup meetings will be held all day, where markets will look for any comments regarding Brexit concerns.
Again, very little data releases will hit the wires. The world’s second largest economy China, will release their y/y inflation figure which is expected to remain constant at the last reading of 2.3%. Germany and France will release their monthly Industrial Production readings and the Trade Balance figure for Germany and the UK also. From the US, further labour data is to be seen from the JOLTS Job openings.
The UK will release the monthly Manufacturing and Industrial Production readings on this day, where markets will see if positive figures are released. The last data readings saw both figures register below zero causing the Pound to lose ground. Again, both monthly Manufacturing and Industrial Production are expected to show an increase for April, if this is seen it could support the Pound. In the afternoon, the US will post their Crude Oil Inventories with current storage at 2.8m.
This will be the biggest day of the week as the Bank of England will release the rate votes and asset purchase votes. With no expectations of a rate rise as all MPC members are predicted to continue at 0.9 to keep rates on hold, the focus of the markets will be on the conference held by Governor Mark Carney. Following the conference, the markets will look to decipher what the plans of the BoE are on the possibility of a rate increase. Also there will be focus on how strong they perceive the UK economy to be. If hawkish comments are made by Mark Carney, Sterling will be expected to strengthen.
The week finishes with the first Q2 GDP reading from the Eurozone, where market consensus is for it to remain at 0.6%. The release of the US Monthly Retail Sales figure will follow in the early afternoon, where the main sales gauge is expected to fall again to -0.3%. If this is seen, it will show that Consumers Spending Confidence is slowing and could see the Dollar weaken. The US will also release its first reading of the University of Michigan Consumer Sentiment where a slight increase is forecast.