Macro data in the US, UK and Australia have, with only a handful of exceptions, been uniformly weak in the past 48 hours, backing the increasingly prevalent view that global economic growth continues to slow. In the US, the labour market remains very strong and the ISM manufacturing PMI surprised on the upside in January, rising to 56.6 from 54.3 in December. But the arguably more important non-manufacturing PMI print fell to a lower-than-expected 56.7 in January – a six month low – from 58.0 in December.
The economic landscape in the UK looks far weaker, with the PMIs for construction, manufacturing and the critical service sector all weakening in January. In particular the service sector PMI edged down to a two-and-a-half year low of just 50.1 – only fractionally above the 50-level below which economic activity is contracting.
In Australia, the trade surplus jumped to AUD 3.7bn in December but for all the wrong reasons: exports contracted 2% mom while imports fell 6%. Moreover, retail sales contracted 0.4% mom in December – almost reversing the 0.5% mom gain recorded in November. Nevertheless the Reserve Bank of Australia which met yesterday and as expected left rates unchanged at 1.50% was if anything perhaps marginally less dovish than the market had expected.
The net result is that the Dollar has inched higher for the fourth consecutive session while the Australian Dollar has also pushed higher. Sterling, however, has slowly but surely lost further ground. Brexit and the ongoing debate as to whether Prime Minister May can renegotiate a deal acceptable to a House of commons majority remain the main Sterling drivers but at the moment weak UK macro data realeases have added to the gloom.
