May 20, 2016 - And this is no blip. Sales in the first 4 months of the year are up 4% on the same period last year and 9
US data signals a rebound in Q2
Friday 20 May 2016
Financial markets’ attention has been focussed on the Fed’s interest rate hiking intentions this week. Yesterday William Dudley, the New York Fed President, provided his take on the subject. According to Dudley a rate rise in June or July would likely be appropriate and that he was “surprised” by Wall Street’s subdued expectations for when the central bank would next tighten policy. However, speaking yesterday Dudley told reporters that he was pleased that the prospect of a move at one of the Fed’s next two meetings appears to be getting through to financial markets. Meanwhile Jeffrey Lacker, the Richmond Fed President, speaking on Bloomberg Radio yesterday said he had supported a rate hike at the April FOMC meeting and thought “the case would be very strong for raising rates in June”.
Contacts: Simon Barry Chief Economist, RoI
[email protected] 01 643 1553 Richard Ramsey Chief Economist, NI
[email protected] 028 9027 6354
A Fed rate increase is dependent upon the economic data. Yesterday the Conference Board’s Leading Index of economic indicators signaled a rebound at the start of Q2. The April figures posted their fastest rate of growth since June last year and exceeded market expectations. Nearly all of the index’s 10 components, with the exception of consumer expectations, contributed to last month’s rebound. There were further encouraging signs from the latest weekly jobless claims figures. Last week’s figures represented the biggest decline since February to 278k. Claims have now been below 300,000, a threshold associated with a strong job market, for 63 straight weeks, the longest stretch since 1973. However, US manufacturing continues to disappoint with the latest Philadelphia Fed survey signaling a negative reading for manufacturing conditions in May. The index has recorded a negative reading in 8 of the last 9 months.
Opening Market Rates EURGBP EURUSD EURJPY GBPUSD
0.7708 1.1225 123.78 1.4562
While there is a chorus gathering amongst US central bankers for a rate hike, one member of the Bank of England’s MPC is singing from a different hymn sheet. Gertjan Vlieghe said that he will consider the case for more stimulus if the UK economy doesn’t improve later this year, even if voters choose to stay in the EU after next month’s referendum. Yesterday there were signs that the UK economy is improving with a rebound in retail sales. The retail sales for April were 4.3% higher than the same month last year, an astonishing growth rate. And this is no blip. Sales in the first 4 months of the year are up 4% on the same period last year and 9% higher than 2014. No wonder it is household consumption that is driving UK GDP growth at the moment. Cheaper prices are making this affordable. The actual amount spent in April is only 1.2% higher meaning that prices have fallen by around 3% in the last year. The UK consumer is clearly making the most of it.
Data for release today
11.00 UK CBI Industrial Trends Survey 15.00 US Existing Home Sales
UPCOMING EVENTS Jun 2nd ECB Policy Announcement Jun 15th FOMC Policy Announcement Jun 16th BoE Policy Announcement
www.ulsterbank.com/capitalmarkets
Looking to the day ahead, there is a distinct lack of economic data / events to attract the eye of financial markets. In the UK there is the CBI’s latest industrial trends survey. Meanwhile in the US we have existing home sales figures for April. Neither of these releases have the capacity to trigger much price action within financial markets. On the fx markets, the main currency pairs are little changed relative to yesterday’s open. EUR/USD remains at $1.122 this morning and sterling has slipped slightly from $1.458 to $1.456 over the last 24 hours or so. EUR/GBP briefly dipped below 76.5p yesterday morning but is back at 77p this morning which is broadly where it started yesterday’s European session. Richard Ramsey
Daily Market Commentary Friday 20 May 2016
Contacts
FOREIGN EXCHANGE RATES EURGBP
0.7667
GBPEUR
1.3043
Foreign Exchange
EURUSD
1.1203
GBPUSD
1.4612
Money Markets
EURAUD
1.5500
GBPAUD
2.0216
Corporate Risk Solutions
EURCAD
1.4670
GBPCAD
1.9132
Structured Investment Products
EURJPY
123.19
GBPJPY
160.67
Regional Treasury
EURHKD
8.702
GBPHKD
11.350
EURCHF
1.1097
GBPCHF
1.44755
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STOCKS & COMMODITIES Dow
17,435.4
NIKKEI
16,736.4
Nasdaq
4,712.5
S&P 500
2,040.0
FTSE
6,053.4
OIL (London Brent)
ISEQ
6,160.5
Gold
48.8 1,254.7
YESTERDAY'S EURIBOR / LIBOR SETTINGS EUR
GBP
USD
Overnight
-0.34
0.48
0.38
1 Week
-0.36
0.49
0.41
1 Month
-0.35
0.52
0.44
2 Month
-0.30
0.55
0.54
3 Month
-0.26
0.59
0.65
6 Month
-0.14
0.74
0.96
9 Month
-0.08
N/A
N/A
1 Year
-0.01
1.01
1.30
Ulster Bank Cost of Funds Rate (365 day count) =
0.73%
Euro rates are quoted in 360-day convention. To convert to 365 day count, divide by 360, & multiply by 365.
Note: the rates in the tables above are indicative only, refer to closing levels from the previous session, and are based on information sourced from Bloomberg
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