- Sterling continued Sterling lower on Brexit uncertainty
- Trump delays Auto tariffs
- Weak employment data hits Australian Dollar
Sterling continued its slide yesterday as Theresa May is due to meet senior Conservative MPs who are demanding she sets a date for her departure from Downing Street. Under pressure from her MPs to stand aside, the prime minister is meeting the executive of the backbench 1922 Committee to discuss her future. Current leadership rules mean she cannot be formally challenged until December. Mrs May has said her departure depends on delivering Brexit. Last month, the 1922 Committee executive narrowly decided against changing the party's leadership rules to allow an early challenge to Mrs May but she was asked to provide a "clear roadmap" for her departure. Today, senior Conservative MPs are expected to press her to set out that timetable, regardless of whether Parliament backs her Brexit withdrawal agreement next month. European election are due next week and if the Conservatives are routed as expected and the PM fails to get her bill passed for the 4th time the pressure on Mrs May to quit will intensify. Risks of a hard line Eurosceptic PM will increase and Sterling will continue its move lower.
US stocks recovered overnight on talks that Trump is going to delay European auto tariffs decision, due May 18, by up to 6-months. All major stock indices staged mild recovery. German DAX also reversed earlier losses to close higher. However, such optimism wasn’t carried through to Asian session today. In particular the Nikkei quickly revised earlier gains and turned red. It’s a clear sign that Japanese investors aren’t buying much into the rumors. And after all, a delay is just a delay, not a resolution. Tariff threats remain for auto exporters like Germany and Japan.
The Australian Dollar weakened today as the unemployment rate jumped to an 8-month high of 5.2% however that was due to rise in participation rate to record high of 65.8%. It’s healthy development in a strong labor market. The set of data is not bad enough to push for an RBA cut in June but it will keep the pressure on the Australian dollar.
Eurozone trade balance will be released in European session. Later in the day the US will release jobless claims, Philadelphia Fed survey, housing starts and building permits. Canada will release manufacturing sales.