Good morning,

It’s good to be back

USD: Jobs higher as G7 conversations set to begin

Friday’s jobs numbers from the States were slightly better than had been expected and allowed markets to end the week on a more positive footing than they had entered it. There is no sign whether Donald Trump’s tweet earlier in the morning that he was “looking forward to seeing the unemployment numbers” having already been briefed on them, will land him in any more trouble than any of his other indiscretions. Whether next month’s numbers will come with a tweet remains to be seen, but a lack of a tweet could easily suggest a poor number.

Trump’s impact on trade will be the most closely watched political highlight this week with the G7 meeting kicking off in Quebec on Friday. Both the EU and Canada will express their dismay and displeasure with the Trump administration’s latest levies on steel and aluminium.

We are unsure what will change Trump’s mind on trade to be honest. Higher costs for domestic manufacturers will eventually feed through into prices and profit margins. We would expect these to start being felt as soon as the end of the year but whether that is enough to change things in time for the November Midterm elections is not yet clear.

GBP: Sterling still subject to pressures elsewhere

Friday’s higher than expected manufacturing PMI surprised although the momentum in new orders and employment within the sector slowed and leaves us less than convinced that the overall improvement is the beginning of a turn higher.

The reading from the construction sector is due this morning at 09.30 with the services sector due tomorrow. The recent changes in retail sales, consumer confidence and some lending data suggests that the weakness in Q1 could be made up in Q2.

The week’s data is very light however and sterling will remain at the beck and call of movements in larger global macroeconomic pressures than what is going on the UK’s High St.

EUR: Italy has a government but for how long?

Italy has a government and while the look and feel of it is a lot like the one initially announced a week or so ago, President Matarella is happy to put the line-up to both houses of the Italian Parliament for a confidence vote. With a government now in place, some of the existential risk for the euro is reduced but this a government that still has some serious ideological issues internally (and externally) and how those translate into fiscal policy can bring this all back into play with only a moment’s notice.

Have a great day.

Jeremy Thomson-Cook, Chief Economist