Both the Euro and the Pound begin this week subject to a tug of war – on one hand, weak PMIs across the globe while, on the other, satisfying parliamentary election results that, while strengthening the presence of Eurosceptic parties like Britain’s UKIP (which actually performed quite badly), France’s National Rally and Italy’s Northern League, continues to reflect a pro-Europe consensus of the masses. Luckily, today’s banking holidays in the US and Europe will keep reactions muted. Meanwhile, Britain’s economy continues to surprise to the upside, retail sales in April increasing 5.2% YoY – a percent higher than expected. The pound has been in an uptrend since Theresa May’s resignation, even though her most probable successor is Euro-sceptic Boris Johnson, who could quite conceivably march towards a no-deal Brexit.
Asian indexes are closing the session this morning strongly in the green, despite 4-month lows on continuing friction between the US and China, led by the Shenzhen Composite’s 2.4% increase. Industrial activity continued to contract in Japan in March, while consumer inflation in April rose 0.9% YoY – exceeding expectations at half that. This morning’s leading economic indicator fell below expectations to 95.9 in March. US President Trump told his Tokyo audience on Friday that Japan and the US were getting close to signing a trade deal that would address the US’ %57 bn trade deficit. Meanwhile, New Zealand’s trade deficit in April fell to $5.48bn, not as much as had been hoped but sufficient to push the local dollar up by 40 pips.
Markit’s Thursday PMI reading for the US shows manufacturing straddling the 50-unit tipping point towards contraction on all 3 counts, new home sales contracting by 6.9% in April, a disappointing continuing jobless claims number, and more negative data on Friday. Durable goods contracted by 2.1% in April, and clearly, the US/China trade dispute is taking its toll on the US economy – even though these figures were computed before the recent Huawei-based escalation. Analysts are now predicting a ¼ point rate cut by the FED, costing the dollar index 75 cents over the weekend.
Bitcoin surged towards the 9K mark overnight after crashing through the 8K resistance level. The BBC reported last week that Facebook is planning to roll out its Global Coin next year in cooperation with the Bank of England and payment firms, like Visa, Mastercard and Western Union. Forbes last week reported that US Congressman, Brad Sherman has called for banning Bitcoin, since it could threaten the Federal Reserve by replacing fiat currency. And oil found support over the weekend at 57.50, after Baker Hughes reported a 5-rig cut in active oil wells. Futures are currently going for 58.43 per barrel of WTI.