Good morning,
Theresa May dissolves parliament with acid
Yesterday afternoon the prime minister notified the Queen of her intention to dissolve parliament ahead of the general election on June 8th. While this is very much a formality, she marked the occasion with a speech outside Downing Street that put down Jeremy Corbyn and the Labour Party, as well as the “bureaucrats of Brussels”, in one fell swoop. May then went on to express just how apocalyptic the future will be if she isn’t re-elected in such a manner that Jeremy, our Chief Economist, pointed out that she’s mimicking the ‘Project Fear’ EU referendum campaign. The PM will be hoping the campaign strategy is more effective this time.
In accusing the European Union of directly influencing the UK’s general election process, many believe May has upped the ante on Brussels, and markets bought into this theory too – the pound shed a bit of value after her speech.
Sterling’s recent recovery underpinned by stronger data
Both construction and manufacturing PMI numbers for the UK this week were better than expected, but services could paint a different story today. Where manufacturing exports are getting more competitive, services input costs are rising and the looming threat of Brexit is unsettling many. More banks have this week announced jobs are switching to Frankfurt, Paris, Dublin and elsewhere and it’s likely this is the beginning, not the end, of these adjustments. While services are still expected to grow, its role as a crutch for the broader economy as a whole appears to be under threat from inflation, regulation and economic confidence – but only time will tell how far this pattern can continue.
Federal Reserve surprise no-one in keeping policy on hold
Last night’s unchanged decision from the Federal Reserve was no surprise. The committee’s neutrality on markets and the economy did little to stir equity, bond or currency markets, but they were keen to stress that current economic weakness should prove transitory. This insistence that the economy is still close to being able to maintain a healthy level of inflation could be a sowing of the seeds for a June rate rise.
The past fortnight hasn’t been a good one for US economic news; GDP growth fell to its slowest rate since 2009, private sector payrolls growth slowed by 30% and quarterly car sales by total volume fell by 16% (which, according to some measures, strips 0.5% of growth from the economy as a whole). None of this bodes well for tomorrow’s nonfarm payrolls release, currently expected at 180,000, which comes on the heels of last month’s sub-100,000 reading.
Last chance saloon for Marine Le Pen
With the polls still in Macron’s favour, last night’s French presidential election was the National Front candidate’s final opportunity to speak to the French public en masse, and she chose to keep on with the message that Macron is an establishment man, a step back and a weak hand. Unfortunately for her, those who managed to sit through the 2+ hours of debate found Macron more convincing, more reassuring and more presidential. Expectations remain for a Macron presidency on Sunday evening.
Have a great day