The US Dollar gained last week as US Treasury bond yields posted over the 3% level for the first time since January 2014. The move in yields saw the Dollar push to just over a three-month high against the Euro. The Treasury bond yields have since dropped back under the 3% level, as Friday saw the advance GDP figure for the first quarter of 2018 showing signs of the consumer spending slowing. Despite posting better than the market expected at 2.3% compared to the forecasted 2%, the reading was a drop from the 2.9% last quarter. Decelerations in personal consumption expenditure and exports is cited as contributors to the decline.
The UK Brexit Cabinet is scheduled to meet this week to discuss the future relationship between the UK and the EU when the UK leaves the bloc next March. However, UK Prime Minister Theresa May has lost a key member of her cabinet, Home Secretary, Amber Rudd. Rudd resigned over claims that she misled MPs over targets the Government had to remove illegal immigrants. May has appointed Sajid Javid to take over the role. Javid was a supporter of the Brexit remain campaign, however has since supported some of the leavers in the cabinet. Pressure on the Brexit Cabinet has also been increased, by EU’s chief negotiator, Michel Barnier giving the UK a deadline of June in which to reach an agreement with the EU over the Northern Ireland border issue. However, his UK counterpart, David Davis believes the issue should be resolved by October.
Today sees a quieter start to the week with no high tier data on the economic docket. Germany, the largest economy in the Eurozone, will be releasing their Retail Sales and prelim CPI figures, expected to post 0.8% and -0.1% retrospectively. Across the pond, the US Core PCE Price Index and Personal Spending figures are expected to be released. Core PCE is expected to remain static at 0.2%, whilst the Personal Spending Index which focuses on the consumers expenditures is expected to increase to 0.4% from 0.2% previously. Also out from the US is the Chicago PMI, expected to post 58.2.
Tuesday will start with the release of the UK Manufacturing PMI, which is expected to decline slightly to 54.9 from 55.1 previously. Despite the expected decline, posting above the key 50 level would still show the UK Manufacturing sector is continuing to expand. The net leading to individuals figure will also be released, expected to post 4.9b. Across the pond, the US ISM Manufacturing PMI is scheduled to be released at 58.6. New Zealand will be releasing their Labour Data figures for the first quarter of the year. Employment Change is expected to tick up to 0.6% from 0.5% previously, whilst Unemployment is forecast to remain static at 4.5%.
The UK Construction PMI will be released on Wednesday, expected to bounce back over the key 50 expansion level to post 50.9 after a disappointing 47 index reading last month. In the Eurozone, the final Manufacturing PMI reading will be released, expected to post 56. The Eurozone will also be releasing the Flash GDP figure for the first quarter of the year. The reading is expected to slow slightly to post 0.4%m, down from 0.6% in the final quarter of 2017. The Unemployment Rate for the area is expected to post 8.5%. Across the pond, ADP Non-Farm Employment Change is expected to drop to 194K. The Federal Reserve will be the focus of Wednesday evening, as they release their latest FOMC statement and rate decision. After only increasing interest rates in March it is expected they will keep rates on hold at 1.75% for this meeting. As the next rate hike is predicted to take place in June, the markets will be watching closely for confirmation from the Fed in the next meeting that they are on track to make this move.
On Thursday, the PMI figure for UK Service Sector, which makes up 80% of the GDP figure, is expected to release. The index is forecast to show an increase to 53.3 from 51.7 last month. In the Eurozone, the CPI Flash Estimate yearly figure will be posted, expected to remain at 1.3%. The core reading is expected to drop to 0.9% from 1%. Back in the US, the ISM Non-Manufacturing PMI will be released, forecast to decline slightly to 58.1 from 58.
The US Labour market will be the main focus of Friday, as the monthly readings of Average Hourly Earnings, Unemployment Rate and Non-Farm Payroll are released. Non-Farm Payroll is expected to bounce back up to 185k for April after a bearish 103k reading for March. The Unemployment Rate is expected to downtick to post 4.0% from 4.1%. However, despite Non-Farm and the Unemployment Rate expected to post bullish readings, the Average Hourly Earnings figure is expected to decline slightly to 0.2% from 0.3% previously. The US session will end with four FOMC members due to speak. John Williams, Randal Quarles and Raphael Bostic will be speaking at the Hoover Monetary Policy Conference on Currencies, Capital and Central Bank Balances. William Dudley will be speaking about financial turmoil and the challenges ahead in an interview with Bloomberg News. Back in the Eurozone, the final reading of the Services PMI will be released, expected to remain at 55. Individual readings from the largest Eurozone economies; Spain, Italy, France and Germany, will also be released.