Markets continue to digest UK general election

Yesterday’s markets

13th May 2015

  • GBP Manufacturing Production
  • GBP Industrial Production
  • EUR ECOFIN Meetings
  • GBP NIESR GDP Estimate
  • USD JOLTS Job Openings

Sterling posts a fresh 2015 high against the US Dollar as the election feel good factor continues. Yesterday the manufacturing and industrial production kept Sterling buoyed. UK industrial output grew at its fastest pace for six months in March whilst manufacturing increased at a faster pace than what was forecast. This comes ahead of the BoE quarterly inflation report. The pick-up in data
only complements the two voting members previous thoughts about possibly voting for a hike last time around.

Meanwhile, the Euro made gains against the Dollar as Greece raided its emergency fund to pay the IMF. However, fears of a “Grexit” still remain as the German government raised the prospect of an in-out referendum to decide Greece’s fate. The President of the European parliament, stated that a referendum was a “possibility” but it would be up to the Greek government to decide.

US data continues to remain under the microscope given the recent change in sentiment towards a June “lift off” in rates. Yesterday’s data revealed that the number of job openings in the US fell from a 14-year high in March, whilst the number of Americans getting hired and leaving jobs increased. Federal Reserve Chair Yellen previously said the rate of voluntary quitting is a key gauge of worker's confidence in the economy. When the economy is stronger, workers are more likely to quit their job due to the greater ease of finding something different. The door is ajar for a June “lift off” and the market will continue to decipher data.

Overnight China released a raft of data which all missed expectations, paving the way for further stimulus from the government to try and spur growth. The earlier hours of this morning saw the Chinese industrial production miss the forecast of 6% falling to 5.9%, followed by a fall in retail sales to 10%, missing market expectations of 10.4%. Concerns in the slowdown being seen in China have already prompted the PBOC cutting interest rates at the weekend, as the world’s second largest economy could miss the government’s annual gross domestic growth (GDP) target of around 7% for 2015.

Today’s markets

12th May 2015

  • CNY Industrial Production
  • EUR Prelim GDP
  • GBP Avg Earnings
  • GBP Claimant Count Change
  • GBP Carney Speaks
  • BoE Inflation Report
  • USD Core Retail Sales
  • USD Retail Sales

Today’s docket will be dominated by the UK and the Bank of England again. This morning we have the release of the UK Unemployment rate, forecast to decline slightly to 5.5%. Simultaneously average earnings and the claimant count change are both due for release with each reading forecast to improve on the previous number. Following this the Bank of England Governor Mark Carney is scheduled to speak, releasing the Central Bank’s inflation report. Volatility is expected during his speech as markets anticipate clues into when the BoE will raise the main benchmark rate. In the afternoon attention switches to the US as we have the release of US retail sales and crude oil inventories.