European currencies had a strong finish before the UK bank holiday, as employment figures from the US provided a glimmer of hope that the Federal Reserve might cut rates sooner than previously thought.
Perhaps the US economy is mortal after all. For months, analysts and commentators (ourselves included) have watched as its labour market expanded, despite rising corporate debt and elevated interest rates.
That bubble burst in April as the economy added 175k non-farm rolls, well below last month’s 315k and forecasts in the 240k region. Unemployment meanwhile increased slightly to 3.9%, which is probably a bigger factor in the Fed’s decision making.
While UK markets took a well deserved break, it was business as usual for Europe yesterday. The final read for the eurozone’s HCOB composite PMI in April came in at 51.7, comfortably clear of March’s 50.3.
S&P Global’s UK services PMI climbed to 55 in April, marking the sixth consecutive month the index has held above the neutral level of 50. That came despite higher input costs, with wages driving that figure to its highest monthly increase since August.
The Conservatives were forced to spend the early-May holiday contemplating what the local elections meant for their party. Last Thursday’s vote was rather disastrous for the Tories, but the fact that they held onto the Tees Valley mayoralty was probably the biggest factor in averting the fully fledged leadership challenge that had been mooted.
Here’s what to look out for this week…
The shortened week sees proceedings condensed, with Tuesday’s German balance of trade for March and the Halifax house price index the highlights of the first half.
Attention turns to the Bank of England on Thursday for their latest interest rate decision. US initial jobless claims then follow in the afternoon.
Friday features UK GDP, which will be crucial in determining whether the economy has exited from recession.
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