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According to Richard Franulovich, head of FX strategy at Westpac, for the US economy, last week’s data generally ran counter to bond market expectations for Fed insurance cuts as a robust +263k jobs in April confirms that there’s still plenty of sizzle to the US economy.

Key Quotes

“Last week also had some cautionary signals, though they were mostly ignored by markets. For example the April US ISM manufacturing index fell to a 2 ½ year low, extending a weakening trend in place since August 2018, while the services ISM defied expectations falling to twenty month lows.”

“These diverging signals for the US are increasingly apparent in other leading indicators too.”

“Against that the broad sweep of soft US survey data covering manufacturing, services and households points to a weaker profile.”

“A notably weaker trend appears to be taking hold, pointing to a period of sub-trend US growth, in stark contrast to the more upbeat signal from US financial conditions.”