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May

Sterling set to bounce, says banks

Published: Wednesday 02 May 2018

  • Canadian economic growth boosts Canadian Dollar
  • US interest rate decision dominates
​​By David Johnson

If you read the letter from Donald Trump’s doctor prior to the US election, you would have to have concluded it wasn’t the work of a medical professional. I am guessing they had to delete the sentence endings where Trump had dictated ‘he really really is’ but the tone was so very blatantly overstating the health of the then presidential candidate. Surely the doctor’s confession isn’t a surprise to anyone other than Trump himself, because he appears to have the memory of a gnat with dementia.
 
Could the end of Sterling’s woes be nigh?
 
It seems the rubbish weather in the UK in April caused a drop in mortgage approvals and a slowdown in credit. Sterling steadied on the news, but many analysts and some banks are suggesting the fall in the Pound is coming to an end. Even a small slowdown in manufacturing wasn’t enough to dampen that sentiment, but Sterling is lower this morning against all but the Euro and is steady against the US Dollar. This morning’s Construction Sector Purchasing Managers’ Index (PMI) was a little more favourable, showing some recovery for UK house building following the extreme weather conditions last month. So, Sterling has the scope to strengthen.
 
Strength against the Euro is certainly possible if the Gross Domestic Product (GDP) data due this morning shows the Eurozone economy to have slowed its pace in Q1.
 
Weaker Kiwi despite improved employment rate
 
The New Zealand Dollar is weaker in spite of a fall in the unemployment rate to just 4.4%. The fact that labour costs (wages) rose at a slower than expected pace will have allayed any fears of interest rate hikes, hence the New Zealand Dollar’s slip.
 
A good day for the Canadian currency
 
The Canadian Dollar had a good day yesterday after a healthy bounce in economic growth. A GDP growth rate of 3.0% on the year is enviable and it helped strengthen the Canadian Dollar against most other currencies. The Canadian Dollar is also being pulled along by the very healthy US Dollar.
 
All eyes on interest rate in US
 
And speaking of the US Dollar, this evening’s interest rate announcement and statement is the focus of US traders today. No one appears to be expecting a rate change from the Federal Reserve, but everyone is hankering for clues as to the next rate change date and the pace of subsequent rate hikes. Whether their appetite for news will be sated after the announcement is an open debate and depends entirely on whether Jerome Powell is feeling the urge for edification.
 
Timber!
 
Japanese scientists have announced they can distil alcohol from wood. Oh come on, as if the rainforests need any more pressure! Just because you can, doesn’t mean you should.
Age is just a number
 
Bob, a 70 year old multi-millionaire widower, shows up at the golf club with a breathtakingly beautiful, shapely 25 year-old on his arm. She is attentive and outgoing and listens intently to his every word.
His buddies at the club are all aghast and seriously jealous. When the young lady pops to the bathroom, they ask, "Bob, how'd you get the gorgeous girlfriend?"
Bob replies, "Girlfriend? She's my wife!"
“Well done,” says Jack, “but, and I mean no disrespect, Bob, but how'd you persuade her to marry you?"
Bob says, "I lied about my age."
His friends respond, "What do you mean? Did you tell her you were 50?"
Bob smiles and says, "No. I told her I was 90."

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Construction Purchasing Managers' Index 47.0 50.5
EUR 10:00 EU: Preliminary Flash Gross Domestic Product 0.6% 0.4%
EUR 10:00 EU: Unemployment Rate 8.5% 8.5%
USD 13:15 US: ADP Non-Farm Employment Change 241k 200k
USD 19:00 Federal Reserve Official Funds Rate 1.75% 1.75%
USD 19:00 Federal Reserve Statement    

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