UK: Weekly FX Market Update 1 September
GBP
Can the UK economy pick up after the holiday period, or is the mood music too dark?
It seems like the Chancellor is floating a new idea for increasing taxes at least once a week. Could investors become disillusioned that the government is unable to cut the welfare state and instead just revert to tax and spend? The Times reports that 60% of a recent YouGov poll said higher taxes would not be justified, and 55% said Reeves should be sacked.
After last week’s strong US GDP release, will the important US jobs report this Friday show weakness as it did last month, and come to the Pound’s rescue?
EUR
French parliament is holding a vote of confidence on Sept 8th to try and force through its austerity budget. If the minority government falls, could President Macron be forced to resign? The FT reports that 67% of the electorate want him to.
So far, the French turmoil is staying localised, but could it spread to the Euro if the situation gets worse?
The ECB said that inflation risks are now ‘finely balanced’. Have they stopped cutting rates just before the Fed starts cutting?
USD
The US economy continues to outperform with quarterly GDP now growing 3.3%.
But the Federal Appeal Court says Trump’s reciprocal tariffs are illegal. The Supreme Court will decide, but if they agree with the Appeal Court, the tariffs will be struck down on Oct 14th and the tariffs already paid will have to be returned – plus interest. Yet another knock to confidence in the US administration.
Meanwhile, the President’s attempts to control the Fed continue. Will the market remain calm or will the US$ take the strain?
Main events for this week:
Mon Sep 1
All day US Labour Day holiday
Tue Sep 2
10:00 EUR CPI Flash Estimate
15:00 USD ISM Manufacturing PMI
Wed Sep 3
09:15 GBP MC Breeden speaks
09:30 GBP Final Services PMI
14:00 USD FOMC Musalem Speaks
15:00 USD JOLTS Job Openings
Thu Sep 4
10:00 EUR Retail Sales
13:30 USD Unemployment Claims
15:00 USD ISM Services PMI
Fri Sep 5
07:00 GBP Retail Sales
10:00 EUR Revised GDP
13:30 USD Non-Farm Payrolls/Unemployment Rate/Average Hourly Earnings
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