Originally published by Rivkin Securities
The US Dollar Index edged higher on Friday by +0.20% after US GDP for Q1 was revised higher. The second of three estimates for the quarter was increased to +1.2% from +0.7% previously while topping economist estimates for +0.9%. For the past few years typically first quarter growth has been weaker followed by a pickup in the following three quarters and that is expected to remain the case with a rebound expected by economists for the second quarter. This is likely to be supported by household spending, which accounts for around 65% of the US economy, and supported by the University of Michigan consumer confidence survey on Friday.
The final reading of the confidence survey dipped slightly in May from the preliminary reading of 97.7 with an actual of 97.1. The current conditions index also decreased from 112.7 to 111.7 as did future expectations down to 87.7 from 88.1 previously. Still the surveys remained just below levels seen prior to the GFC signalling that household optimism remains strong.
US equities finished the session relatively unchanged with the S&P 500 index up just +0.03% while the Nasdaq 100 continued marching to new all-time highs up +0.17%. US treasury yields were little changed despite the upwards revision in GDP.
The pound continued to weaken, closing -1.06% lower against the US dollar and -0.87% against the euro, the pound’s two biggest trading partners. The weakness in the currency came following further polling that suggested that the Tories lead over Labour narrowed to as low as five points ahead of the June 8th election. The Tories currently hold a 17 seat majority and failure to expand on this would be seen as Pound negative as it would weaken PM Theresa May’s bargaining position ahead of Brexit negotiations.
Ahead for the week it’s all about the Euro-zone and US key data being released for both economies. On Tuesday US PCE inflation, the Fed’s preferred measure, will be released at 10:30pm AEDT and Euro-zone inflation on Wednesday at 7:00pm AEDT. Euro-zone consumer and business confidence surveys will be released at 7:00pm AEDT Tuesday while the U.S. conference board will release their measure of consumer confidence on 12:00am AEDT. Employment will also be in focus with German unemployment on Wednesday at 5:55pm AEDT followed by US non-farm payrolls and wages on Friday at 10:30pm AEDT. Finally we’ll also get a look at the US ISM manufacturing survey at midnight on Thursday as well as manufacturing PMI reports for the Euro-zone and GDP for France and Italy throughout the week.
Locally the S&P/ASX 200 finished lower on Friday, down -0.66% although we can expect a slightly stronger start to trade this morning with ASX SPI200 futures up +7 points at the close of trade on Friday.
Data releases:
· ECB Draghi Speaks At European Parliament 11:00pm AEDT