With inflation unchanged, the Federal Reserve must now take action
Hello from London! ????
This week we continue our tour of the EEA as we visit the beautiful city of Riga in ???? Latvia.
Here's a quick recap of the recent movement on the main pairs, economic news and what to expect for the week ahead.
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The situation remains relatively quiet in the UK with PMIs in expansion in services and construction, leading a positive composite PMI, well above the 50 mark. However, the construction sector seems to be slowing down slightly with a smaller score than the previous month.
Unemployment came out as expected at 4.1% for August.
Keir Starmer is currently in Rome to renew dialogue with Europe, with investments secured in the UK from Italian businesses and immigration to be discussed further with European partners as Germany establishes border checks on its land borders with all neighbours to stop illegal immigration.
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Weak PMIs in Europe last week, with manufacturing in contraction as shown by VW looking to stop production amidst low demand for the first time in 87 years, with the group also announcing it is cancelling an agreement guaranteeing job security for workers until 2029.
The services sector is contracting but not yet in contraction with weaker figures than expect across the board.
Germany factory orders were 2.9% in July, far above the -1.6% expected, but the German trade balance was worse than expected at 16.8Bn against 21Bn expected, illustrating the difficulties of the automobile industry.
The European Union GDP grew 0.2% QoQ and 0.6% YoY in Q2, slightly below the expectation of 0.3% QoQ.
The two big news last week however were Macron picking Michel Barnier as PM amidst political instability that saw no party win the parliament elections in July, with the left alliance (NUPES) coming out in front. Michel Barnier is a member of the Républicains, a right-wing party and former negotiator of the EU for Brexit (unlikely to please right wing parties in the UK). This choice is meant to avoid a parliament dissolution by appeasing the far-right party Rassemblement National and protecting the pension reform adopted earlier this year.
领英推荐
Last week French inflation was for the first time below the 2% target at 1.8% YoY for August, a positive sign from an economy perspective as this puts the country within the European Central Bank target range.
The European Central Bank was the other big news of the week as it decided to cut interest rates by 25 basis points, less than the 50 basis points expected, as a consequence of the struggles in Germany and its reliance on exports to China, and foreign energy resources.
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The United States was packed with news last week with first of all the non-farm payroll figures coming the week prior at 142k jobs created. The figure is much debated given the revised figures for July which show a lower figure than initially announced, bumping up the numbers for August, leading to questions about the actual performance of the job market.
Tuesday night, the presidential race saw Kamala edge slightly on top in the contest in the first debate on television. The following day, Putin announced (ironically) that he supported Kamala Harris, and Trump responded with a promise to end the war in Ukraine. However, the big political event was last night's second assassination attempt on Trump by a gunner who seems to have been motivated by Trump's stance on the conflict in Ukraine, although his motives remain unclear. The situation could have an impact on polls but is mostly alarming as of the state of democracy in the largest economy of the world.
This week we're awaiting Federal Reserve decision on interest rates as inflation remains unchanged. Core CPI came out at 3.2% and CPI at 2.5%. My bet is on a 50bp cut, given the economic situation in the US, with most US banks agreeing with bets between 75bp and 125bp cuts by the ends of the year.
Open rates week 16/09/2024:
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