Macron Threatens Frexit.
EU must reform.
Emmanuel Macron the favourite for the French Presidential Election is Brussels Poster boy for the future.
However, Macron seems to have not been well enough briefed. He is now saying that unless the European Union reforms, it will be faced by a Frexit vote. The campaign has now entered its final week and Macron has sensed wavering in her opponent Marine le Pen’s resolve.
Opinion polls put Macron 60-40 ahead and to appear more centrist, Le Pen has appeared more conciliatory in her attitude to the EU and single currency. While she is still advocating departure from both she has loosened the timing somewhat.
The single currency has fallen back below the 1.0900 level versus the dollar and is struggling to maintain 0.8420 versus the pound. Markets are very thin today with the May Day Holiday.
Trump’s first 100
Anyone finding that President Trump’s first one hundred days in office were anything other than exactly as expected must have been living in a cave!
Some valuable lessons have been learned that should stand him in good stead. His “if I say it it must be true” and “if I say it it will happen” mantras clearly do not work in Government as they may have done during his campaign.
He has been defeated (an unusual experience) over Obamacare, his tax plans haven’t taken shape and trade has so far not been affected.
Two of his main pledges; to build a wall between the U.S. and Mexico and label China a currency manipulator are very much on the back burner. The latter is very much a political “hot potato” since Trump now finds himself in need of Chinese help with North Korea.
Kim Jung Un the North Korean Leader continues to thumb his nose at Trump and is considered a clear and Present threat to Asian stability. China are totally invested in ensuring that Asia remains the global industrial powerhouse as much as it sees the west as its primary customer.
Its employment week (already)
Regular readers will know that I treat this week with the apathy of someone who has seen it all before. The depth of the market now means that releases like last month’s which would, in the past, have brought havoc are barely worth returning from the pub for. Oh sorry, that’s something else that has probably changed.
So, does anyone have any idea about the non-farm payrolls this week. It seems that every month +180k have become en-vogue. Even following last month’s +98k disappointment, we are right back to +180k for April. Only time will tell. The unemployment rate will remain well below 5% but average hourly earnings continue to be sluggish which concerns the Fed.
Before the NFP bunfight, the FOMC will meet and pronounce on interest rates. Unlike her ECB counterpart, Janet Yellen can concentrate on the U.S. as a whole. They have been doing this a long time! The major interest is whether there will be one or two more hikes this year and when the Fed’s balance sheet will be shrunk back to normal.
The dollar index had a quiet week last week not quite managing to re-attain the 100 level. The pound and Euro are still well supported for their own reasons and the market is in a pretty neutral pose regarding risk.
U.K. economy slowing
Fridays release of preliminary GDP data for the first quarter of 2017 shed a QoQ fall to 0.3% from 0.7% in Q4 ‘16.
The consumer is starting to worry about rising prices outstripping wages. Next week’s quarterly inflation report and MPC meeting will shed some light on official thinking but both may come too soon to see the effect of the relatively stronger pound on the inflation outlook.
It can be assumed that the report was completed following the General Election announcement so given its forward-looking bias it may not be as harsh as it could have been.
BoE Governor Mark Carney will take it in his stride but the vote will see at least one for a hike.