Macro Commentary

The government confirmation this week that the prime minister will bring her deal back for a 4th vote, in the first week of June, has led to strong sterling selling across the board.

The current likelihood is that the deal would fail again, with May promising to announce a timetable for her departure following the vote, regardless of the outcome.

Next week’s EU elections will only add to the current uncertainty.On the economic front, average earnings this week dropped slightly to 3.2%, still comfortably above inflation, whilst the unemployment rate dropped to 3.8%, its lowest level since the mid-1970’s.

Elsewhere, the ongoing US-China trade dispute continues to weigh on markets, with the Chinese retaliating this week.
On the exchanges, sterling broke lower as the political uncertainty continues.

GBP/USD has broken below 1.2800 this morning, its lowest level since February, whilst GBP/EUR has broken below 1.1450.
A lack of progress on Brexit cross-party talks, will likely keep sterling sentiment weak leading into the June vote.

GBP/EUR – 1-year chart

Week ahead

Date Release Last Expected*
22/5/19 UK CPI YoY 1.9%  2.2%
22/5/19 UK RPI YoY 2.4%  2.8%
22/5/19 UK Public Sector Net Borrowing 0.8b 5.2b
22/5/19 US Fed Minutes
24/5/19 UK Retail Sales YoY 6.7%  4.7%

*Bloomberg survey

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1175 AUD/USD 0.6890
GBP/USD 1.2775 USD/AED 3.6730
GBP/EUR 1.1430 GBP/AED 4.6930
USD/CHF 1.0090 EUR/AED 4.1050
USD/JPY 109.75 XAU/USD 1286

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7353 +8.93%
S&P 2876 +14.74%
EUROSTOXX 3438 +13.96%

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.80363% 2 year 0.99%
6 month 0.90263% 3 year 1.03%
12 month 1.04675% 5 year 1.11%


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