Philip Hammond set positive economic tone

New UK Chancellor Philip Hammond took to the Conservative stage, and set a positive tone for the conference.

New UK Chancellor Philip Hammond took to the Conservative stage, and set a positive tone for the conference.

He stated that roads and railways, among other infrastructure, has been seriously under invested, and that the UK is considerably behind other dominant countries. Hammond has been assigned the task of announcing the Autumn Statement, and investors will want his positive sentiment to be more concrete on November 23.

Much needed positive wise money data for UK

With regards to data, the UK enjoyed some much needed positive news, with Manufacturing PMI rising to 55.4 in September against 53.4 in August. Exports have been enjoying a tremendous amount of added work, as the pound continues to be hit hard by most trading currencies.

That said, importers are starting to take financial hits across the board. Buying foreign currency is proving expensive for import businesses, and Teresa May’s announcement that Article 50 will be triggered Q1 2017 has found financial directors wincing that much more.

European bank job cuts

European bank job cuts have made the front pages this morning, as a number of banks are suggesting seats may be left empty in the coming years. Dutch, German and Spanish banks have all stated in recent days that a staff cut is only natural due to current market conditions, as well as some looking at a new digital age, stating a non-requirement for human resource.

UK stock exchange highs

The FTSE 100 has cleared its year high as sterling fell off a cliff in early trading, after May announced an Article 50 date, and outlined her hard stance on key issues. Today has already seen the Reserve Bank of Australia keep interest rates at 1.5%, with New Zealand sharing its Dairy Auction averages with onlookers. In the European and US markets, we have very little to mull over, with UK Construction PMI the only dish to pick.

Wise Money waiting for key US data on Friday

Today we have US employment data which will give us a taster as we build up to the key non farm payroll data on Friday.

wisemoney US employment data which will give us a taster as we build up to the key non farm payroll data on Friday.

Feedback from the labour market is the highest consideration, as the FOMC judge whether it is appropriate to increase interest rates. On Friday the payroll data is expected to come in at a healthy 175k, and average earnings are likely to increase by 0.2%.

We could also see the unemployment rate fall slightly to 4.8% from 4.9%. If we see positive US data this week, it will build expectations for a September rate hike and lead to USD gains.

Eurozone inflation softer for August

In the Eurozone, CPI for August (y/y) has come in slightly softer than expected at 0.2% vs 0.3% expected. In addition, the unemployment rate for July has been confirmed at 10.1% which is in line with forecast. This morning the euro has been on the back foot and disappointing inflation data will not help this trend.

Pound finds tentative momentum

The Pound has managed to pick up this morning against the euro and the USD. Following a better run of UK data this week, the pound is finding some tentative momentum. Tomorrow we have UK Manufacturing PMI, and on Friday Construction PMI to give further feedback for the UK economy.

UK interest rates cut to 0.25%

The Bank of England’s has cut interest rates by half to a new record low of 0.25%.

Bank of England’s cut interest rates by half to a new record low of 0.25%.

In addition the Bank of England (BOE) launched a massive stimulus package designed to save the UK economy from recession.

The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to slash interest rates to an all time low; they also hinted that it might cut rates “close to but a little above zero” and could unleash more Quantitative Easing if needed.

With a 60 billion government bond buying program and a new initiative to buy 10 billion pounds of corporate bonds, the Bank of England hope to support the necessary adjustments in the UK economy following Brexit.

Mark Carney and the Bank of England think that the outlook for growth has “weakened materially” and they anticipate that the pain will be felt in 2017 as their Quarterly Report shows 2017 forecast slashed from 2.3% to 0.8%, the largest downgrade to its growth forecast to date.

Inflation is forecasted to increase thanks to the weakness of the pound, with the Central Bank now anticipating to hit their 2% target in Q4 of 2017 as opposed to Q2 of 2018 as previously anticipated.

The unemployment rate is also expected to rise to 5.4% in Q3 2016 compared to a previous forecast of 4.9%.

From the US to Europe, other data to come

After Super Thursday, the market will look at the US non-farm payrolls. Following the strong increase in June, a majority of economists are now expecting a weaker number with job growth around 180,000 as Wednesday’s ADP employment report showed signs of softness in the employment components of both ISM reports.

Looking at the day ahead the rest of the data due out in Europe will be overshadowed. Germany factory orders numbers for June, the latest trade balance reading for France and the latest UK house price data are the main data this morning before the market turns its eyes to the July employment report in the US.

Federal Reserve likely to hold off interest rate rises as jobs falter

US non farm payroll data last week came as a rude shock to the markets at a paltry figure of 38,000 against an expected number of 164,000.

US non farm payroll data last week came as a rude shock to the markets at a paltry figure of 38,000 against an expected number of 164,000.

The US Dollar lost ground against most of its counterparts straight after the release and has now almost moved an interest rate hike in June off the table.

Analysts and hedge funds now expect the Federal Reserve to only raise rates once in 2016, against the initial mandate of the planned 3 or 4 rate hike dot curve for the year.

The EURUSD pair rallied up 2 cents though has pulled back a bit this morning as German Factory orders data have been released showing a decline to -0.2%.

Markets will now turn their attentions to Fed member Rosengren and Fed Chair Janet Yellen’s speeches later today and also keep a close eye on labour conditions data to try and determine if the non-farm payroll number was an outlier or if broader economic conditions are slowing.

Sterling is losing ground, pushed by the ‘leave’ campaign

The Pound has lost considerable ground against the board this morning as the ‘leave’ campaign continues to gather momentum in the UK’s Referendum polling.

YouGov telephone and online surveys have put the ‘Brexit’ campaign in the lead at 45% against the ‘remain’ side garnering 41% with 11% still undecided. Expect Sterling to be fairly volatile in the lead up to June 23 up to the date of the vote.

Meanwhile, investors will look towards market data comprising of BRC Retail Sales Index for interim direction though the main theme for the pound remains with the UK Referendum polls.

US jobless claims drop

We are just a few hours away from the spring Bank holiday and today is expected to be a quiet day.

We are just a few hours away from the spring Bank holiday and today is expected to be a quiet day.

The main piece of news out today will be the second estimate of US growth in the first three months of the year which is scheduled at 1.30pm GMT.

The first estimate was disappointing and showed growth slowing to an annual rate of just 0.4% and with the latest sets of data; economists believe the figure could be revised up. Jobless claims dropped to 268K from 278K, durable goods orders rose 3.4% and pending home sales increased 5.1%.

We learned from Fed President Powell that a rate hike may be appropriate fairly soon. Powell said “Depending on the incoming data and the evolving risks, another rate increase may be appropriate fairly soon”.

Many analysts agreed that Powell didn’t show any sense of great urgency to move at the June meeting and he stated that he had not made his mind up yet. He sounded cautious when he added “I can imagine the upcoming Brexit vote as presenting a factor in favour of caution about raising rates in June”.

Investors encouraged by stronger German data

No major Eurozone economic reports were released yesterday but investors were encouraged by stronger German data. Everybody seems to agree the ECB will leave interest rates unchanged but improvements in Germany and France could persuade the Central Bank to wait and see the effect of the current stimulus before deciding on the next step.

UK GDP figures released yesterday

Over in the UK, GDP figures were released yesterday and came in line at 0.4% on a quarterly basis but were slightly weaker on an annualised basis as they came in at 2.0% versus a market expectation for a 2.1% reading. Brexit is weighing on the economy as the underlying data showed weakness. Exports were down and business investment was disappointing.

The only bright spot was provided by government spending and consumer spending, which helped to offset the decline. The housing market is also showing signs of a slowdown as data from BBA Mortgage approvals showed a low at 40.8K against 45K in the previous month. This seems to indicate that the Brexit might be a drag on the housing market.

As mentioned earlier, the economic calendar is light today. In Europe business and consumer confidence surveys are due out in Italy, consumer confidence in France and retail sales in Spain.

The main focus will be in the US with Q1 GDP growth scheduled for release with analysts expecting a 0.4% upward revision. Later in the afternoon Fed Chair Yellen will also be interviewed at a Harvard event. The US and UK markets will remain closed on Monday.

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New car sales greater than expected

The new car sales figures surprised with the Society of Motor Manufacturers and Traders announcing a huge number of cars had been sold in March- the highest numbers since 1999.

The new car sales figures surprisedwith the Society of Motor Manufacturers and Traders announcing a huge number of cars had been sold in March- the highest numbers since 1999

Although March is notorious for its strong numbers, the amount which were sold had surprised some. The sector’s improvement is welcoming for the UK economy as GBP took a further nose dive yesterday against its major currency pairings as the EU Referendum inches closer.

It looks as if the voting will be fairly tight, with there now being a real possibility of a ‘Brexit’ causing uncertainty with investors and taking some of the back bone away from the pound recently.

Uncertain economic outlook

Last night the FOMC Minutes for March suggested a mixed review with regards to another possible rate hike in April. With global economic uncertainty but better domestic data, the 12 members didn’t see eye to eye which could suggest a rate hike at the end of Q1 is unlikely.

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FED keeps interests rates flat

The Federal Reserve last week sparked US dollar weakness as they kept interest rates on hold.

The Federal Reserve last week sparked US dollar weakness as they kept interest rates on hold. The forecast outlined by the Fed at the beginning of the year was for four gradual rate rises over the course of the year, but now markets are anticipating just one further hike, if any at all during 2016. This is owing to the uncertainty in global markets as well as flat lining inflation and global growth concerns.

Despite this, commodity prices have rebounded slightly. This has helped stock markets recover from their slump earlier in the year and triggered a strong rally in risk assets.

Markets will be keenly watching this week’s data from the US for further direction as we move into the Easter weekend. Core Durable Goods and unemployment claims are released on Thursday.

While the Federal Reserve have chosen to remain dovish on forthcoming monetary policy, the European Central Bank have expanded their quantitative easing programme and cut deposit rates.

The outlook for growth and inflation in the EU has continued to slow further, but this has helped reverse the negative sentiment; with the Central Bank standing firm in its efforts to boost inflation.

Sterling rallies against the dollar

Sterling has rallied almost 4 cents against the US dollar on the back of dovish comments made by the Fed last week on monetary policy as well as a watchful evaluation of global growth conditions.

As monetary policy gets slightly less divergent, fears regarding a Brexit scenario and a soft inflation outlook has capped any further gains for the pound.

The CBI Industrial Trends Orders print is the only set of data out on the economic calendar to provide further direction.

Sterling remains flat as Osborne delivered Budget 2016

It was a big day for the UK yesterday as George Osborne released the Government’s budget for 2016.

It was a big day for the UK yesterday as George Osborne released the Government's budget for 2016.In a coup for small businesses, middle class workers, savers and energy companies, Mr Osborne’s tax cuts have been widely criticised as an attempt to woo UK voters in his last statement ahead of the EU referendum in June.

The UK economy’s growth and productivity forecasts were downgraded disguising a £56 billion ‘’black hole’’ in the Government’s finances as Osbourne favoured the more crowd pleasing approach.

Osborne warned that amidst a backdrop of slowing global growth and turbulence in financial markets, a possible Brexit would only hurt UK business and consumer confidence further.

Despite the budget receiving much attention here in the UK, foreign exchange markets refused to take notice and Sterling remained steady against all major currencies over the course of the day.

Yellen ends US interest rate rise speculation

Last night the Federal Reserve’s FOMC met in the US. Janet Yellen’s resulting speech stated that interest rates would remain unchanged for the time being and was much more dovish in tone than expected.

With all the clues suggesting that, the Fed won’t be discussing interest rates again now until June, the US dollar came under pressure. However, despite dollar weakness and the worrying state of the global economy, Yellen suggested that US economic activity had been expanding at a moderate pace.

Today markets will be spending the majority of the day deciphering Janet Yellen’s press conference from last night.

Later in the trading session, we will receive EU CPI data and an interest rate decision from the Bank of England. From the US, the Philadelphia Fed manufacturing survey and weekly Jobless Claims will be of interest.

UK productivity lags behind rest of G7

The UK was much less productive than the rest of the G7 in 2014- lagging by the most since 1991, official figures have shown.

The UK was much less productive than the rest of the G7 in 2014- lagging by the most since 1991, official figures have shown.The Office for National Statistics (ONS) said output per hour was 20 percentage points below the G7 average.

The UK was behind the US, Germany and France by a large margin and was slightly worse than Italy and Canada.

Productivity is seen as key to helping increase living standards in the UK by many experts.

“These figures show UK productivity continues to lag behind other developed economies,” ONS chief economist Joe Grice said.

“Since the economic downturn, productivity growth has slowed in most developed economies, but by more in the UK than the average.”

The Chancellor, George Osborne, pledged in July to take steps to encourage more long-term investment in infrastructure and by businesses to boost productivity.

Institute of Directors chief economist James Sproule said that UK firms should focus on “agility” rather than productivity.

“The economy of the future looks set to be dominated not by big companies, but by fast, agile, quick-moving and reactive ones,” he said.

“The firms that can respond to consumer demands most effectively and bring new products and services to market will reap the rewards.”

Productivity isn’t everything, but in the long run it’s almost everything – as Nobel Prize winner Paul Krugman noted 25 years ago in his book The Age of Diminished Expectations.

Unless you improve the amount each worker produces, you can’t expect living standards to rise.

It’s a harsh verdict on British economic performance that since 1991 when the ONS started making international comparisons, the gap between our productivity and the rest of the world’s advanced economies widened to a chasm.

Sure we have had economic growth. But the fact that we’re still 18% less productive than we would have been on pre-crisis trends gives you some idea why that growth hasn’t always flowed through to higher wages.

If each worker produced more, employers could afford to pay higher wages. That – of course – isn’t to do with workers working “harder”.

Much more decisive in improving how much each produces is investment – in plant and machinery, in skills and in public infrastructure such as roads.

The ONS international comparisons relate to 2014, so they’re a bit behind the times.

The latest official data on UK productivity, released in July, recorded a sharp pick-up in productivity at the start of the year.

Investment has also picked up. But if we’re going to catch up with the rest of the G7, we’ll have to sustain that for years.