The Marketplace - 25th May 2016
Today’s IFO survey for May will provide a further update on the strength of the German economy. Other survey data for May have been mixed. The flash’ PMI indices strengthened, while the ZEW noted a decline in expectations about future conditions. So far this year the IFO headline index has softened but this was not reflected in Q1 GDP growth which rose by a strong 0.7%.
The decline in the survey has been driven by the expectations component which investors expect to feed through to softer GDP growth in Q2. For May, look for a marginal improvement in the headline index to 100.7 from 100.6, led by expectations which are projected to rise for a third consecutive month. This would point to activity picking up later in the year.
The advanced report of US trade in goods is expected to show a rebound in the trade deficit in April from March’s very sizeable decline. That was driven by what looked to be an erratically large fall in imports. The forecast trade deficit for May, however, is below the monthly average in Q1 suggesting that net exports may make a more positive contribution to Q2 GDP growth than has been the case in recent quarters.
The Bank of Canada is expected to leave interest rates unchanged after today’s policy meeting. The recent rebound in oil prices is positive news for the Canadian economy. The cooling in the rally of the Canadian Dollar over the past week will probably also have lessened any concerns the BoC might have that the currency is rebounding too quickly.
The Marketplace - 24th May 2016
Bank of England Governor Carney, along with his MPC colleagues Broadbent, Weale and Vlieghe, will appear before the Treasury Select Committee to answer questions on the latest Inflation Report. They will no doubt face questions about the economic forecasts, including views on the potential risks surrounding the EU referendum.
In terms of UK data, public finance figures will receive only limited attention at the beginning of the financial year. Analysts look for net borrowing (excluding banks) in April to come in at £6.8bn against the market consensus forecast of £6.4bn. The CBI’s Distributive Trades Survey could garner some attention the weak headline net balance for reported sales in April was at odds with the strong official retail sales numbers, but it is expected to rebound to +8 in May from -13.
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The Marketplace - 23rd May 2016
UK and US GDP updates, US durable goods orders and key German surveys stand out this week. The FOMC released minutes from its April monetary policy meeting last week, where it showed growing support for a Fed rate hike in June. Many economists are saying that if the economic data is consistent with economic growth in the second quarter, the US will call for a rate hike in June. However, some are pathing the way for a July hike, reducing the downside risk of the Brexit Vote. In any case, there is a hawkish shift and the Dollar is liking it. In the UK, more ‘BREMAIN’ polls have helped the Sterling recover somewhat.