HomeContributorsFundamental AnalysisSterling Offers Slight Recovery

Sterling Offers Slight Recovery

  • Sterling offers slight recovery
  • Aussie data disappoints but Chinese data is worse
  • Butter prices sharply higher

The Leader ‘nearly all’ the leaders debate yesterday didn’t tell us much we didn’t already know. Whether Theresa May’s decision to stop the event will prove damaging is another thing. The BBC is clearly in love with Jeremy Corbyn and are trying hard not to make it too obvious (maybe Laura Kuenssberg could try harder) but the markets haven’t really reacted much. Sterling is a tad stronger against the US Dollar, but remains subdued against the Euro; wallowing in the €1.14 area.

Sterling rose against the Australian Dollar after last night’s data releases. Much stronger than expected Australian retail sales numbers showed a monthly rise in sales of 1.0% was more than three times the consensus forecast, but that was offset by the much weaker than forecast personal capital expenditure data and a poor release from China. Their Manufacturing Purchasing Managers’ Index (PMI) was below the magic 50. That’s the demarcation line between growth and contraction, so it has repercussions for the countries that supply China with its raw materials and that very definitely includes Australia. At the time of writing, we have not yet seen Australia’s Commodity Index, but that too will impact the Aussie Dollar.
Today’s data diary includes a smattering of manufacturing data from across the Eurozone, but nothing that spans the whole currency sharing bloc. The Eurozone Manufacturing PMI is looking good once more, at 57.0 for May, and employment across Europe in the sector growing rapidly.

UK data is limited to the Manufacturing PMI – posting another healthy growth figure of 56.7 – and a 10-year government bond auction. These are always interesting as a litmus test of the bond market’s view of future interest rates.

US data is also dominated by manufacturing sector stuff, but we will also see the weekly Jobless Claims statistics and the Private Payroll data from ADP. I suspect these figures will be little more than a sideshow, because tomorrow brings the official employment report and that is still the first piece of data that covers the previous month. Whilst the Non-Farm Payroll count doesn’t carry the same weight and excitement it did a decade ago, it is still a bellwether for the US economy.

And a lot of newswires are carrying the story that wholesale butter prices have soared since reports were published suggesting the belief that butter is bad for you is a myth. The story is slightly skewed, because butter prices slumped last year, so the recovery is from a very low level, but it does serve to highlight the ebb and flow of scientific opinion. It reminds me of the Woody Allen film, Sleeper, where, in the future, cabbage is bad for you, but smoking is encouraged for its health benefits. It could happen.

Oh – and stronger dairy prices are very good news for the Kiwi Dollar, so it will strengthen if this trend continues.

Late night in the office

Jenny the receptionist has worked late to finish a report and as she is packing up her things she sees the Chairman of the company standing in front of the shredder looking puzzled.

"Can I help you Mr Charterhouse?" she says.

"Oh can you Jenny? This is a highly confidential document. How do you work this thing?"

She puts down her handbag and walks across. "You just turn it on here and put the paper in there," she says.

"The Chairman does as she suggested and the turns to her. "Thanks Jenny. You’re a lifesaver. Now how do I tell it I need three copies?"

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