North American Summary and Highlights 14 May
Overview - The USD made some gains in North America while GBP slipped on political risk.
North American session
US April retail sales with a rise of 0.5% overall, 0.7% ex auto and 0.5% ex auto and gasoline were in line with expectations, while initial claims picked up to a still low 211k from 199k. The data still suggests economic resilience. The response to the data was modest but the USD gained some momentum later in the session, USD/JPY moving above 158 to 158.20 and EUR/USD falling below 1.17 to 1.1680. The USD made similar gains versus AUD and CAD. The passing of 30 Chinese ships through the Start of Hormuz was a cautiously positive signal, but reports of Iran seizing a separate ship caused concern.
GBP political risks picked up with the resignation of Health Secretary Streeting and the resignation of a Labour MP intending to allow Manchester Mayor Burnham back into parliament both raised the prospect of a serious challenge to PM Starmer’s leadership. EUR/GBP moved above .87 from .8660 while GBP/USD fell to 1.34 from 1.35. In contrast EUR/CHF was marginally softer.
European session
Very quiet overnight extends into the European morning with little news or action across the board.
The UK sees Mar GDP come in slightly stronger than expected at 0.3% (mkt 0.2%) and 1.1%y/y (mkt 0.8%), but seen as old news with prospects potentially dimming in Q2. BoE’s Breeden in the FT: obviously correct that we can't wait forever [on raising rates], but we don't need to do it in June or July. BoE in a good place to be able to watch what's happening in the economy. We don't need to rush to act.
No new developments on the UK leadership front yet, other than Angela Rayner declaring herself cleared by HMRC over tax avoidance to free the way to throw her hat in the ring. Gilts meanwhile have now almost backfilled Monday’s reaction gap within a few ticks.
So far nothing dramatic out of the Trump-Xi meeting (the talks were “great”). The Taiwan issue looms heavy though, China briefing after that there would ‘clashes and even conflicts, putting the entire relationship in great jeopardy’ if it wasn’t handled ‘properly’.