Will we start seeing a slowdown in the US labour market?

Good morning

US and EU equities made small gains yesterday, while the US dollar gained into the London close, with GBPUSD trading down to 1.3260 and EURUSD to 1.1265.  The decent performance was in part down to a better than expected US ISM PMI reading.  Since then we’ve seen a bit of a reversal, with both pairs now 1.3315 and 1.1330 respectively, while futures pricing points to a firmer open for EU stocks.

EU are still lining up their trade proposal for the US, which is reported to increase EU purchases of US goods by some EUR50bn.  China meanwhile are said to be mulling over the idea of trade talks but are looking for US to reverse the unilateral tariffs they put in place.  I’m not sure this is quite as positive as some believe but for now the markets like the idea of China and US talking.  AUD has gained , GBPAUD now down at 2.0740, just 30 pips or so off the lows we’ve seen for the past month. 

Morgan Stanley has told its clients they expect BoE to cut rates by 25bps at each of the next five meetings which would leave rates at 3.25% by November.  They would prefer to see BoE act quicker and are even thinking a 50bps cut could be on the cards.  That’s a pretty dovish outlook, although GBP isnt paying a great deal of attention to the report.

Local elections have been held in many areas across the UK and results so far show Reform has made gains mostly at the expense of the Conservatives although Labour have also lost 13 councillors.  The public is sending a message, let’s see how the Labour government react.

This morning we have the latest EU inflation numbers, but the key for the day will be US nonfarm payrolls this afternoon.  Markets are still looking for signs of a slowdown in the US labour market, expectations are for a headline around the +130k area compared to +228k last month, although I have seen some forecasts as low as +50k this time. 

Spurs, Man Utd and Chelsea all won their European semi-finals last night with comfortable enough margins to be reasonably confident for the second legs.  Premier league action this weekend, with only four matches left this season it’s going to be a race for the teams near the top to see who gets the coveted Champions League places next season.   

The Championship title will be decided this weekend, Leeds will be confident of beating Plymouth Argyle and if they do so the title is theirs.  Second place Burnley will be hoping Leeds slip up, but do face a tougher test themselves against Millwall who are battling for a place in the promotion play offs along with four other teams. 

F1 action returns this weekend as the teams head to Miami.  The McLarens will be hoping to extend their leads in both the drivers and constructors tables, while  Lewis Hamilton will be looking for something better from his Ferrari.

It was an absolute scorcher of a day yesterday, it’ll be slightly cooler today and we’ll be back to the mid-teens on Sunday and next week which is a bit of a disappointment but rather typical given it’s a UK bank holiday.  I hope you managed to enjoy some of the sunshine while it was here. 

So it’s a long weekend for us in the UK.  Next week brings US ISM services PMI on Monday, we’ll keep half an eye on that and we’re available should you need anything, but the key events will be the Fed rate meeting on Wednesday and the BoE rate meeting on Thursday. 

Have a great weekend as and when it comes,

-  09.00 ECB economic bulletin

-  10.00 EU HICP, unemployment

-  13.30 US nonfarm payrolls

-  15.00 US factory orders

US economy contracts but Trump blames Biden

Good morning

Welcome to May.  We’re already one third of the way through the year and I feel it has come and gone very quickly.  Not everyone agrees but for me seems to be just flying by.  I must be having fun!

US and EU stocks ended a touch higher having been in negative territory for much of the day, as US Q1 GDP fell to -0.3%, the first contraction in the US economy since 2022.   Trump won’t be happy it comes on his watch although he’s already blamed Biden and whatever he did or didn’t do during his tenure.   

We’ve seen a stronger US dollar through yesterday and again this morning, GBPUSD currently down at 1.3275 and EURUSD is at 1.1290.  USDJPY has traded higher partly down to the stronger USD but also a dovish BoJ meeting, where they kept rates unchanged but lowered growth and inflation forecasts and warning of further risks to both.  USDJPY has traded from below 143.00 up to 144.75.  GBPJPY just around 192.00.    

On US trade talks, there are reports that EU ar preparing to present proposals to the US next week.  China says US has reached out to them while Greer, the US Trace Rep has said no official talks are under way, both statements seem to undermine Trump’s suggestions last week that China have been in touch.  Trump has said there are potential deals with Japan, India and South Korea.

US have finally signed an agreement with Ukraine over access to natural resources.  Therer is some hope that this could ensure US remain at the negotiating table for peace although I fear Trump will now pressure Zelensky to give up all sorts of territory in order to allow the US to ransack, err I mean develop, Ukraine’s resources.  Still, I’d hope it acts as something of a deterrent to Putin.

Football fans were treated to a fantastic match between Barcelona and Inter Milan yesterday evening.  Inter had taken an early two goal lead, but the match ended 3-3.  Both sides were superb, the quality of football was exceptional.  The young superstar Yamal was playing his 100th match for Barcelona despite being just 17 years old.  Incredible.  I’m already looking forward to the second leg. 

Tonight sees one of the biggest matches in the European calendar, of course I refer to Spurs semi-final of te Europa League against Bodo/Glimt.  Man Utd will take on Bilbao, and Chelsea will hope their run of form in the Europa Conference League continues as they take on the mighty Djurgarden.  Meanwhile Forest will be hoping they beat Brentford this evening in their premier league fixture to take them back into the Champions League places.

Also in football, congratulations to Mark’s U14 Gurnard Comets team who finished third in their league and just five points off the top spot after a strong end to the season.  All bodes well for next season.

Today’s calendar brings more US jobs data this time in the form of Challenger job cuts and initial jobless claims, we’ll also have ISM manufacturing PMIs.  Aussie retail sales could offer some interest overnight, we’ll also be watching for any updated trade talk news from Trump.  Whether or not we believe it is another matter. 

-  12.30 US challenger job cuts

-  13.30 US initial jobless claims

-  14.30 CAD S&P manufacturing PMI

-  15.00 US ISM manufacturing PMI

-  23.45 NZ building permits

-  00.30 Japan unemployment

-  02.30 AUD retail sales, PPI

Big day for economic data, and we'll hear from Trump a few times

Good morning

US equities had another decent day despite European markets looking more mixed yesterday.  Overnight Asian markets were generally positive.  We didn’t see a great deal of action in the currency markets yesterday, GBPUSD sat in the low 1.34’s for much of the day while EURUSD traded in the high 1.13’s, both still around those levels as I type. 

Aussie inflation data was released overnight, coming in slightly above expectations, and AUD pushed higher as a result.  GBPAUD, which had traded above 2.1000 yesterday is now 2.0910, having seen a low of 2.0860. while AUDNZD pushed up from 1.0740 to 1.0810, now back to 1.0790.  AUDUSD is just around the 0.6400 level with 0.6440 proving to be some sort of decent upside resistance area.  A 25bps cut in rates by RBA is still expected in May.

UK trade negotiators have warned that a US trade deal could face problems if UK and EU align closer.  There has recently been talk of UK drafting a statement that would see the UK and EU rejecting the most controversial of Trumps’ policies, while I see this morning that UK are close to agreeing to meet EU’s food standards, something that I’m sure would disappoint the US who want to sell their chlorinated chicken and hormone treated beef to the rest of the world.

Canada voted in Carney’s Liberals but they failed to get the majority required.  Trump has already spoken to Carney to congratulate him, Carney has said both leaders agreed on Canada’s status as a sovereign nation and the importance of working together for their mutual benefit.   

In sport, Arsenal put up a valiant fight against a slick PSG side but lost 1-0, leaving them with a lot of work to do in the second leg next week.  Barcelona take on Inter Milan this evening in their semi-final. 

Today’s calendar is pretty full with GDP numbers from Germany EU and US, we also have the Core PCE number from the US this afternoon.  US ADP employment is also out following a weaker than expected JOLTS release yesterday.  I see Trump speaking several times today, he’s just passed 100 days in the role during which time we have seen huge volatility in the financial markets and US consumer confidence is at a five year low.  Expect more talk of Trumps desire for rate cuts and no doubt he’ll take the opportunity to tell Powell what a bad job his doing over at the Fed.

If you thought it was warm and sunny yesterday, its likely to be even warmer today so make sure you get outside at some point for a much needed vitamin D top up.  Could be up to 25°c this afternoon, and the forecast suggests it’ll be a couple of degrees warmer tomorrow.

Have a great day….

-  08.55 German GDP, unemployment

-  10.00 EU GDP

-  12.00 BoEs Lombardelli speaks

-  13.00 German HICP

-  13.15 US ADP employment change

-  13.30 US GDP, Core PCE, personal income/spending

-  14.45 US Chicago PMI

-  15.00 US pending home sales

-  16.00 President Trump speaks

-  16.30 BoEs Lombardelli speaks

-  21.00 President Trump speaks

-  01.00 President Trump speaks

-  02.30 AUS trade balance

-  03.30 BoJ rate announcement