Boris down but not out

9th September 2019 Market Update

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?? GBP -  Sterling finished the week higher last week with support coming for the currency on the probability that Brexit will be delayed until the end of January as well as the prospect of an election being called being allayed for now.

Adding to Boris Johnson’s woes of last week, UK work secretary Amber Rudd quit the PM’s cabinet on the weekend with a scathing attack on the government’s approach to Brexit suggesting that no formal negotiations had taken place with the EU.

With another vote on an election being called today, markets are expecting another blow to Boris Johnson with the call for an election to be voted down.

However, Johnson looks likely to continue his efforts to avert a delay in Brexit following reports over the weekend that he plans to defy legislation passed last week and push for a last-minute hearing with the Supreme Court.

As well as Brexit developments, markets will be paying attention to a barrage of economic data in the earlier part of this week.

Today sees the release of manufacturing and industrial production figures for July with output expected to fall by 1% and 1.1% respectively. GDP figures are expected to show growth of 0.1% in July, up from 0% growth in June.

Tomorrow, we have jobs data with unemployment expected to remain at 3.9% and wage growth expected to drop marginally to 3.8%.

?? EUR - The euro finished last week versus the US dollar marginally higher ahead of a key day for the ECB this Thursday.

Recent data from the Eurozone, has shown that manufacturing and growth outlooks remain negative with fears that Germany could well fall into a recession this year. To counter, Mario Draghi and the ECB are forecasted to unleash an array of measures on Thursday to boost an ailing economy, with markets expecting interest rates to drop -0.4% to -0.5% as well as a resumption of large-scale bond buying by the central bank. The impact on the euro will depend on what is unveiled by Draghi and any further weakness in the currency may well prompt another attack by Donald Trump on the ECB and its attempts to weaken its currency as well as criticism of the Fed for not cutting rates further.

?? USD -  Friday’s job numbers disappointed with the addition of only 130,000 jobs falling shy of market's expectations. On the plus side wage growth came in higher at 3.2%, with this positive news meaning that the Fed will only likely cut interest rates by 25 basis points next week.

Focus this week will fall on the inflation print on Thursday expected to remain at 1.8% and then retail sales figures on Friday expected to show an increase of 0.2%.



GBP: Boris threatens to go to the Supreme Court
EUR: Markets braced for interest rate cut
USD: Job figures disappoint


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