14th May 2019 Market Update
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🇬🇧 GBP – There was no data of note from the UK yesterday. Despite this, sterling dropped off as a by-product of China saying it would raise tariffs on $60bn of American goods. Theresa May is expected to press ahead with talks with Labour despite various sources stating they are close to collapse. Thirteen of May’s former cabinet colleagues wrote to warn the prime minister that the conservative party could be split if Brexit means tying the UK in to a customs union. The upcoming European elections could prove to be a final straw for May if some of the polls turn out to be true.
Today the unemployment rate and average earnings are released from the UK. Unemployment is expected to remain low at 3.9% and average earnings is expected to be released at 3.4%. This is slightly worse than last time, however this is still a very strong reading.
🇪🇺 EUR – Like the UK there was no data from Europe yesterday. This morning final German CPI came out inline with expectations, and German WPI (wholesale price index) came out above expectations at 0.6%. This is a leading indicator of consumer inflation and suggests an uptick in consumer spending. Despite this, the euro has not moved significantly in response. Later on this morning German ZEW economic sentiment is released, and is expected to be an improvement on last month’s optimistic reading.
Despite the lack of data yesterday, the euro strengthened as a safe haven currency as China announced that it was going to impose $60bn of Tariffs on US goods. If the trade war escalates further, the euro could continue to strengthen.
🇺🇸 USD – US stocks fell sharply yesterday in response to China’s increase in the tariffs. This was the largest one day drop in US stock prices since January. In response to this, the US dollar initially weakened against the euro, before recovering. Overnight Asian stocks slid further, and US stocks could slide further in response. This afternoon FOMC member George is speaking at the economic club of Minnesota, however this unlikely to affect the market. Tomorrow afternoon retail sales and core retail sales are being released.
GBP: Sterling weakens as a trade war victim
EUR: Euro strengthens in response to the intensifying tensions
USD: US equities drop more than 2% as China implements tariffs
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