Friday May 1, 2015 - 16:06:55 GMT
Share This Story
. - .
ECONOMIC DATA ANALYSIS - MARKETS AWAIT UK ELECTION OUTCOME
ANALYSIS FRIDAY 1 MAY 2015
MARKETS AWAIT UK ELECTION OUTCOME
attempts to form a government could be more protracted than in 2010
- US labour market
figures to suggest Q2 growth pickup
- Firming euro area
growth prospects provide counterpoint to ongoing Greek negotiations
uncertainty could still disrupt markets. With opinion polls
suggesting that Thursday’s General Election might not deliver a clear victor,
markets appear to be accommodating the prospect of a hung parliament. Although
it remains elevated, the implied volatility of the pound against both the euro
and the dollar has fallen back a little over the last few days. Moreover,
sterling has rallied against the USD with a rise from $1.46 in mid-April to
$1.52, while firming euro area prospects have seen it hover around €1.35.
Although Gilt yields have risen sharply over the last week, this primarily
reflects a general backup in global rates. To the extent that Gilt yields have
outperformed their US counterparts, this appears to be largely driven by a
reassessment of the relative prospects for the timing of the first policy rate
hike. Nonetheless, it is worth noting that much of the market reaction to the
2010 election took place during the post-vote negotiations which led to the
formation of the governing coalition. If the current polls are correct, any
discussions this time around could prove to be far more protracted and possibly
inconclusive. Meanwhile, with this week’s preliminary ONS print for Q1 GDP
suggesting that growth slowed to 0.3% from 0.6% in Q4, and today’s
disappointing manufacturing PMI for April, the services PMI for April, which is
released on Wednesday, will attract considerable attention as a Q2 momentum
signal. A strong outturn could strengthen the case that the Q1 growth estimate
will eventually be revised up.
labour market data to steady nerves. Worries about a Q1 loss
of growth momentum have not been confined to the UK, as the US has seen a steady
run of downbeat releases since the turn of the year, culminating in this week’s
0.2% (saar) Q1 GDP print. Some of this softness reflected poor weather and
strike activity, and like the FOMC, we anticipate a Q2 rebound. Despite the ISM
manufacturing index for April remaining stable at 51.5, its forward-looking
components, such as new orders, point to pickup in activity. April’s
labour market figures (Fri) are set to offer another soothing exhibit. In
particular, we expect payrolls to rise by 220k (alongside a possible upward
revision to last month’s 126k outturn), with the unemployment rate edging down
to 5.4% from 5.5% in March. This tightening of the labour market should
underpin a rise in annual pay growth from 2.1% to 2.4% which would be the
fastest pace since August 2009. Such a pickup would chime with the 0.7% Q1
climb in the employment cost index and support the Fed’s expectation of
inflation rising back to target over the medium term. Other US data next week
include factory orders (Mon) and trade balance (Tues), both for March, as well
as the April non-manufacturing ISM (Tues). Despite easing a little, the ISM
outturns have remained fairly robust during Q1 with a 56.7 average monthly
print compared to 57.4 in Q4.
ballast for Euro area growth. Amid concerns about Greece’s current
ability to make its scheduled IMF repayment of around €750m on May 12, a
breakthrough in the ongoing discussions with its creditors could see a
Eurogroup meeting convened at short notice and the release of the remaining
€7.2bn of bailout funds. Meanwhile, euro area retail sales (Weds) and
German industrial production (Fri) should provide further evidence in support
of an anticipated Q1 pickup in regional activity from the 0.3%q/q Q4 print.
to cut policy rate again? Since the RBA trimmed the
policy rate to 2.25% in February, growth concerns have, if anything, gathered
pace. While policy makers remain concerned about the potential impact of a
lower rate on house prices, the rise of the Aussie dollar against the USD could
prompt another 25bps cut on Tuesday.
This document, its
contents and any related communication (altogether, the 'Communication') does
not constitute or form part of any offer to sell or an invitation to subscribe
for, hold or purchase any securities or any other investment. This
Communication shall not form the basis of or be relied on in connection with
any contract or commitment whatsoever. This Communication is not intended to
form, and should not form, the basis of any investment decision. This Communication
is not and should not be treated as investment research, a research
recommendation, an opinion or advice. Recipients should conduct their own
independent enquiries and obtain their own professional legal, regulatory, tax
or accounting advice as appropriate. Any transaction which a recipient of this
Communication may subsequently enter into may only be on the basis of such
enquiries and advice, and that recipient’s own knowledge and experience. This
Communication has been prepared by, and is subject to the copyright of, Lloyds.
This Communication may not, in whole or in part, be reproduced, transmitted,
stored in a retrieval system or translated in any other language in any form,
by any means without the prior written consent of Lloyds. This Communication is
provided for information purposes only, and is confidential and may not be
referred to, disclosed, reproduced or redistributed, in whole or in part, to
any other person. This Communication is based on current public information.
Whilst Lloyds TSB ank plc (“Lloyds TSB”) and
Bank of Scotland plc ("Bank of Scotland") have exercised reasonable
care in preparing this material and any views or information expressed or
presented are based on sources it believes to be accurate and reliable, no
representation or warranty, express or implied, is made as to the accuracy,
reliability or completeness of the facts and data contained herein.
This material has been
prepared for information purposes only and Lloyds TSB, Bank of Scotland, their
directors, officers and employees are not responsible for any consequences
arising from any reliance upon such information. Under no circumstances should
this material be treated as an offer or solicitation to offer, to buy or sell
any product or enter into any transaction. If you receive information from us
which is inconsistent with other information which you have received from us,
you should refer this to your Lloyds TSB or Bank of Scotland Relationship
Manager for clarification.
Lloyds Bank Corporate
Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of
Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds
TSB Bank plc. Registered Office: 25
Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065.
Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH.
Registered in Scotland
no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no.
SC32700. Authorised and regulated by the Financial Services Authority under
registration numbers 119278, 191240 and 169628 respectively.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."