- Sterling slides as Brexit gets even more tricky
- Aussie employment index – worst since 2016
Sterling, you may have noticed, dropped in value yesterday as further delays and disagreements emanated from the rancorous talks between the Tory and Labour party over Brexit. An emissary has been sent to Brussels to assess their mood and many on the labour side of the talks are convinced no deal can be done because they have demanded a 2nd referendum on the outcome and the Tories say that is wrong when they haven't delivered on the 1st referendum yet. Both parties committed to delivering Brexit but 3 years later, nada. Either way, traders decided to take profit on Sterling's recent gains ahead of this morning's UK employment data.
The forecasts suggest we will see a small slowdown in wages growth but most expect the growth rate to be above 3.0% and many see it at 3.4%. That is inflationary and should boost the Pound. We are also expecting the unemployment rate to stay at an exceptionally low 3.9%.
Overnight we heard that the NAB Australian employment index dropped into negative territory in April. That minus 1 reading is the lowest since January 2016 and adds to the pressure on the Reserve Bank of Australia to ease their monetary policy to keep the economy from sliding further. The Aussie Dollar is a tad weaker overall but, with Sterling being knocked back, the GBPAUD rate is largely unmoved.
This morning also brings the German ZEW economic sentiment indices, which have been quite poor of late. The forecasters see to think we will see a marked upturn in these indices but, with German manufacturing still in decline, that would seem an odd. Be prepared then for a negative surprise. If the forecasters are right, the Euro may push up into the high $1.12 area and maybe push Sterling down below €1.15 and vice versa.
The interesting data from the US this afternoon is the import and export price inflation. Increase inbound inflation but lower export earnings are expected. To be fair though, all of that will be overshadowed by the ongoing US v China trade rhetoric. Higher tariffs on goods whizzing each way across the Pacific don't help anyone other than the negotiators. The US Dollar has been the overall beneficiary though because investors feel safe when their money is lodged in USD assets and especially US treasuries.
And goodbye Doris Day. Like every one of my era, I fell in love with her on screen but loved her even more when she threw herself into animal welfare causes, establishing a pet rehoming charity in 1978 and campaigning for animal rights ever since.