Good morning

The GBP came under renewed pressure yesterday after Q1 GDP numbers confirmed a slowdown in consumption. Month on month came in at 0.30% while year on year was 2.50%. This is pretty much confirmed what the Gov. reported recently.  In line with what we are witnessing globally the UK is not immune to a general slowdown in Q1 GDP numbers. Investment in property in the UK has also slowed after the Chancellor raised the stamp duty on properties in excess of £2mio meaning investors are being more cautious with their money. There is still “new” money coming out of Greece as local investors steer away from the local economy in the event of a default and GREXIT. As I have repeatedly said, the latter is not an option and all efforts will be made to ensure this does not happen. But as much as I think GREXIT will not happen, it still cannot be ruled out. Even if GREXIT does not happen, the Greeks could still default sending shock waves through the financial markets. With a continued slowdown in China and recent disappointing data out the US the UK will likely see 2015 GDP at between 2.2-2.4% which on the face of it is still acceptable but lower than what the Chancellor and Govt. were hoping for. The continued austerity measures the government is initiating are essential to keep the UK on her toes without falling into a bear trap. As such I expect the GBP to face renewed selling pressure especially vs the USD over the coming weeks.

US GDP numbers are to be published later and like the UK we are expecting the data to confirm a slowdown across the pond too. We know the FED are lining up a rate hike this year and the uptick in CPI recently took us a step closer. However the FED will be watching today’s number as a slowdown in growth could delay that rate hike. The last thing the FED want to do is jump the gun on their rate hike cycle only to see the US economy fall back into a recession. While most will probably agree this won’t happen, caution and care is called for. What the data is showing us is things are not what they appear and further austerity (in China, EU, UK, Australia et al.) is needed to keep the local economies moving ahead. It does surprise me then that the anti-austerity faction in Greece continues to believe they can get through this “mess” without changing the way they spend. Last time I checked EUR were not raining over Greece so where they think the money will miraculously appear from is beyond me.

Today has seen some very interesting data published again pointing to a slowdown. Here are some: (1) Australia new home sales down from 4.405 to 0.60%, (2) NZ business confidence down from 30.205 to 15.70%, (3) Japan construction orders down from +10.8% to -12.10%, (4) Swiss GDP down from +0.605 to -0.20% for Q1 and year on tear down from +1.9% to +1.1%, (5) German retail sales down from +4.3% to +1%, (6) French PPI 0.10% to -0.40%, (7) Spanish CPI down from +0.90% to +0.50%  – as you can see does not make for pleasant reading this morning. Still to come today is Italian GDP, Spanish Business confidence, Italian CPI, Greek PPI, Greek GDP, Portuguese GDP and Italian PPI. It is interesting to observe that the EUR has actually clawed back some of her losses we saw over the past 24 hours to trade at 1.0950…as I mentioned yesterday next Friday is another repayment day to the IMF so expect some comments over the weekend from the authorities over Greece. Overall my impressions remain the same with the USD ultimately king of the castle.

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