Euro strengthens after Italy come to an agreement
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- June 1, 2018
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It has been confirmed that Giuseppe Conte will be the next Italian Prime Minister after the right-wing League party and the anti-establishment 5-Star Movement reached agreement on a Cabinet.
A little-known economics professor Giovanni Tria will become Economics Minister. Meanwhile, the Spanish Government seems set to lose a confidence vote today, which will likely result in Socialist Party leader Pedro Sanchez becoming President.
Today’s US labour market statistics will, as usual, be closely watched by markets as a key indicator of the state of the economy. The last couple of monthly reports have shown employment growth below the average rate of the past few years. However, with most indicators continuing to suggest that the labour market is buoyant, we forecast a larger, 205k, increase this month and expect the unemployment rate to remain at an 18 year low of 3.9%. Of most interest to markets, however, will be earnings growth. So far wages have picked up only modestly despite a seemingly tight labour market, but there are now tentative signs of an acceleration. We expect a 0.3% monthly rise. Meanwhile, a rebound in the May manufacturing ISM is expected from April’s nine-month low.
In the UK, the May PMI manufacturing will provide the latest evidence on whether the economic activity has picked up in Q2. However, it should be noted that this measure did not weaken to the same degree as some other surveys in Q1. We look for a rebound of the ‘headline’ manufacturing index to 54.5 from 53.9, which would still leave it below its Q1 average.
Updates for the Eurozone May manufacturing PMI will also be released this morning, but these are not expected to be revised from the initial reading. That is also likely to be true of Italian Q1 GDP growth, which was initially estimated at 0.3%.
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