Read on the Trading Floor - 03 May 2024
Today’s focus… #Torycrisis, MOF on the front foot as US data softens
Macro Themes At Play
Theme 1 - #Torycrisis trending on Twitter
Theme 2 - US Labour Data: Not as hot as expected?
Theme 3 - Week Ahead Previews
Further reading and listening of note
Theme 1 - #Torycrisis trending on Twitter
It's not a surprise to see Rishi's Cons struggling in the local elections. This has been well flagged for months, although someone should update ChatGPT that still believes he's the Chancellor. The knives will most certainly come out as Sunak has even lost a Mayoral seat in his own backyard.
Where do the Cons turn from here? Does anyone want to be the PM on a sinking ship? After all the polls have them lower than when Liz Truss was competing against a lettuce.
Would the next leader not be better off letting Rishi lose the election and then rebuild from the remains of the Cons party on the opposition bench. Nobody wants to be a "new boiler" in number 10 for just a few months before Starmer comes in. Although if one does accept the post there are of course the Public Duty Costs Allowance (PDCA) that is currently set at £115k (BBC - Will Liz Truss get a pension? The perks former prime ministers get).
Finally, Boris is the gift that keeps on giving ...
Theme 2 - US Labour Data: Not as hot as expected?
Yesterday's stagflation is today's goldilocks. After two very hot ECI and Unit Labour Cost prints, obviously today's AHE was going to come in softer than expected (0.2% vs exp 0.3% MoM). A September cut is back on the cards as the weaker than expected headline NFP (175k vs exp 243k) increases the probability of a pre-election move.
Have the BoJ / MOF nailed the turn in the US economy again? Just like their USD supply in Sept/Oct 2022 was when US data dropped lower. They've most certainly benefited from US2s rolling over and failing at 5% and breaking the 2024 uptrend. Finally the trend in soft sentiment data continues south with ISM Services PMI dropping back into contraction territory... 49.4 vs exp 52.0!!!! Extreme length in USD positioning is getting squeezed by the moderate data and of course the MOF supply. It will be interesting to monitor the IMM positioning next week.
US 2s fails at 5%
Source: Tradingeconomics.com
MacroHive - G10 FX Weekly: MoF Makes Selling USD/JPY Rallies Compelling
Brent Donnely am/FX - USDJPY Chartfest
ZeroHedge - Unit Labor Costs Soar In Q1 As 'AI Productivity Boom' Fails To Show Up
Steno Research - Time for liquidity bets
ING - Weaker US jobs numbers boost expectations of a September rate cut
Theme 3 - Week Ahead Previews
ING - Asia week ahead: China’s trade data and an upcoming RBA decision take the spotlight
ABN Amro - The week ahead: 6 - 10 May 2024
Newsquawk - Week Ahead 6th-10th May: Highlights include RBA, BoE, BoJ SOO, ECB Minutes, UK GDP and Canada jobs
Nomura - The Fed Pushes Back
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