Macro Commentary

The continued political uncertainty and lack of progress on Brexit are weighing on sterling, with the focus moving towards the EU elections on May 23, following the local elections due May 2.

Next week we get the Bank of England Quarterly Inflation Report, which will provide an update on the Bank’s interest rate expectations.

In the US, the trade talks with China appear to be making further progress, underpinning market sentiment.

US equity markets continue to outperform as company earnings remain robust and the economy remains strong.

US benchmark interest rates are also at their recent highs, despite the Fed indicating no further rate increases this year.

On the exchanges, dollar strength has been the dominating factor.

GBP/USD has broken decisively below the 1.3000 support, hitting its lowest levels since mid-Feb. There is strong buying interest building ahead of 1.2800, whilst 1.3130 becomes the initial topside level to watch.

GBP/EUR has held up relatively well on general Euro weakness.

We expect 1.1800 to continue to hold the topside, with 1.1500 continuing to provide solid downside support.

GBP/USD – 1-year chart

Week ahead

Date Release Last Expected*
1/5/19 UK Mortgage Approvals 64.3k  64.0k
1/5/19 UK Markit PMI Manufacturing SA 55.1  53.0
1/5/19 US FOMC Rate Decision (Upper bound) 2.5% 2.5%
2/5/19 UK Markit/CIPS Construction PMI 49.7  50.1
2/5/19 UK BOE Bank Rate 0.75% 0.75%
3/5/19 UK Markit/CIPS Services PMI 48.9  50.2
3/5/19 US Nonfarm Payrolls 196k 181k

*Bloomberg survey

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7434 +10.01%
S&P 2926 +16.73%
EUROSTOXX 3491 +16.13%
DFM GENERAL INDEX 2787 +10.16%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1145 AUD/USD 0.7030
GBP/USD 1.2915 USD/AED 3.6730
GBP/EUR 1.1585 GBP/AED 4.7420
USD/CHF 1.0200 EUR/AED 4.0935
USD/JPY 111.65 XAU/USD 1283

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.82525% 2 year 1.02%
6 month 0.94000% 3 year 1.08%
12 month 1.08963% 5 year 1.17%

London

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DG-FX@arbuthnot.co.uk

Dubai

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dubai@arbuthnot.co.uk

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