Summary:
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Speculation rife that PM May set to leave
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GBP remains near recent lows
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Stocks slump after EU PMIs
A surprising speech from Theresa May on Tuesday, in which the PM seemed willing to sacrifice a significant amount of Tory support in the hope of gaining cross-party votes in order to pass the withdrawal agreement, appears to have been the straw that broke the camel’s back with speculation doing the rounds that she will be gone by the weekend. It is no secret that the PM’s days have been numbered for some time now but this last-ditch attempt to force through her deal and leave with any semblance of a victory has back-fired. What this all means for the markets is a significant increase in the chances of a no-deal Brexit and this has sent the pound steadily lower in recent weeks.
The pound has dropped back to the 78.6% fib this morning around 1.2615. This pair on track for a scarcely believable 13 daily losses in the past 14 sessions. Source: xStation
The UK head to the polls today for the EU elections and while the outcome could give a further indication of the electorate’s views on both the government and opposition’s handling of Brexit, the more important result could arguably be those from across Europe. A surge in populist anti-EU MEPs would change the dynamic for future Brexit negotiations and likely serve to further increase the risk of a no-deal that is already looking more probable with May’s successor expected to be more open to leaving in this manner.
Industry surveys point to subdued activity
With the latest developments on the trade front dominating the headlines in recent weeks it’s easy to overlook the impact that the tariffs already in place are having on global growth. German manufacturing can be seen as a bellwether for the global economy and according to recent industry surveys there are alarm bells ringing with the PMI for May producing a 3rd consecutive sub 45 print. The last time this metric did this was in the depth of Eurozone debt crisis back in 2012 and with the latest reading coming in worse than expected, it now means that 9 of the past 10 releases have missed forecasts.
The German Dax is where this weakness can be most keenly felt with the benchmark dropping back below the 1200 level to trade at its lowest level of the week, but there’s been sizable declines across European bourses and Wall Street is called to open significantly lower this afternoon.
The German Dax has tumbled by more than 1.5% today and the market is now probing potentially key support with a rising trendline from December and prior swing lows around 11850 not far away. Source: xStation
