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Pound hit by poor economic performance

Published: Friday 04 May 2018

  • Sterling slips on more shaky data
  • Mixed US data doesn’t slow the ebullient Dollar
  • US employment report awaited
​​By David Johnson

So it seems the Prime Minister has avoided a major embarrassment in the UK local elections and all the BBC’s bluster about the Labour Party sweeping the board have proven to be nonsense. All will be revealed as the day progresses. Whether that will embolden Theresa May enough to call another election is an open question.
Pound survives local election but slides on economic data
The local elections haven’t had an impact on the Pound, but yesterday’s data certainly has. The GBPUSD rate is at a five month low and the Pound is down against most other currencies – other than the Euro – but more of that in a moment… The data itself showed the April rebound the markets had expected in the service sector didn’t materialise and the UK economy only grew at 0.1% in the month to April, which is the slowest pace since 2012.
Other data showed this economic slowdown isn’t just a UK issue. Eurozone inflation slowed in April and we saw earlier in the week that Gross Domestic Product (GDP) growth in the currency sharing bloc was also slower in Q1. This morning’s service sector Purchasing Managers’ Index (PMI) and retail sales data painted a slightly more positive picture; although still showing signs of economic growth, the pace of growth is slowing down.
US economic news blows hot and cold
The US Data has been erratic of late. Yesterday’s service sector indices from the US were significantly weaker than last month and below forecasts, but factory orders beat expectation. Today’s big US news story is the employment report. That has been less dramatic in its impact over the past few years, but, on the back of such uncertain data, a poor reading here would weaken the over-inflated US Dollar.  
A punch where it hurts
And finally, I know we are all used to rail and bus strikes in the UK. It seems the only ones who suffer are the poor passengers. Japanese bus drivers found a new way to register their discontent though. They carried on running the buses but refused to charge anyone for the service. That’ll hit their bosses where it hurts, I think, and if you want public support, in the words of Mr Punch, ‘that’s the way to do it’.
On that note, may we wish you a great extended weekend and we’ll see you on Tuesday.
Life’s a lottery…
A guy returns home from work and his wife is sitting in the kitchen with her lawyer. When the guy asks what is going on, the woman says, "Mr Bradley is here because I’ve won the lottery. What shall we do?"
The man says, “Well I am entitled to half of that, so give me my half and I am out of here.”
“Really?” says the wife. “What about us, what about the house, what about the kids?”
“Your problem,” says the husband. “Gimme my share and I am gone. The sooner the better.”
"Excellent”, says the wife as she turns to the lawyer. “Mr Bradley, you are my witness. Did my husband just disown the house, our marriage and the children?”
Before the lawyer could answer, the husband says, “Yes I did”, and the lawyer nods.
The wife turns back to the husband and says, “So that’s settled then, I won £6.80. Here is £3.40. Now get out!"

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Final Services Purchasing Managers' Index 55.0 55.0
EUR 10:00 EU: Retail Sales 0.1% 0.5%
USD 13:30 US: Average Hourly Earnings 0.3% 0.2%
USD 13:30 US: Non-Farm Employment Change 103k 190k
USD 13:30 US: Unemployment Rate 4.1% 4.0%
CAD 15:00 Canada: Ivey Purchasing Managers' Index 59.8 60.2

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