The impact of Brexit on the economy

  • Wednesday - Will UK politicians be able to agree on a way ahead for Brexit?
  • Thursday - US Producer Price Index may hold clues over mounting inflationary pressures
  • Friday - UK Q1 growth will clarify the impact of Brexit on the economy

Tuesday

Today, the US JOLTs Job Openings for March will be published.  The reading is forecast to come in at around 7.2 million, a modest uptick from February’s print but a stretch away from recent highs of around 7.6 million. Any improvement here would stand to reinforce the Federal Reserve’s view that the underlying US economy remains robust and there’s no immediate need for interest rate cuts. In light of last Friday’s strong Non-Farm Payrolls stat, there’s plenty of reason to believe an uptick will be delivered.

Wednesday

German Industrial Production data for March is set for release this morning. Expectations are already running high that the country’s Gross Domestic Product (GDP) print for Q1 will impress next week, so an improvement on February’s annualised print of -0.4% would seem likely. If this occurs, it should allay fears of the European Central Bank’s (ECB) motivation for dramatic changes to monetary policy, and in turn, lend some support to the common currency.

Cross-party Brexit talks are expected to conclude today, which could also offer Sterling some direction.

Thursday

The US Producer Price Index for April will be released today. A print of 2.4% is expected, up from the 2.2% recorded in March and a further improvement from the two-year low of 1.9% in February. This is a measure of factory gate prices, and since US consumer inflation is proving stubbornly low, any improvement here could serve to vindicate the Federal Reserve’s interest rate decision last week. Rising costs for manufacturers ought to filter down into the wider economy over time.

Friday

UK Q1 GDP is set for publication, and there are concerns the pre-Brexit stockpiling boost may be fading. The quarterly reading is expected to show 0.5% growth, up from 0.3% in the final quarter of 2018. However, with the monthly print for March forecast to slide into negative territory, this might suggest the economy’s trajectory is downward and undermine Sterling, especially if no Brexit progress has been announced. 

The US Inflation rate for April will be released today. In light of the sluggish PCE Deflator, the Fed’s preferred measure of inflation, it’s worth noting that expectations are for improvement. Following March’s print of 2.0%, modest gains towards 2.1% are forecast. While this is a small move, it would serve to underline inflationary pressures, again doing little for those hoping the Fed will soon be adopting a more dovish stance.