Sterling benefited slightly from an improvement in global risk appetite and August’s inflation expectations rose; reducing the necessity for Bank of England monetary easing. Legislation to block a ‘no-deal’ Brexit at the end of October was approved by parliament and is set to receive royal assent today. Opposition parties reiterated their intention to block a General Election in a House of Commons vote today. Brenda from Bristol has yet to offer her opinion in mainstream media.
Overall, the Pound ebbed; a correction from sharp gains in mid-week amid major uncertainty, settling below 1.2300 on the Dollar and the Euro near 1.1140. Over the weekend, Cabinet member Amber Rudd resigned from the government, increasing tensions further and the government stated that it would test the limits of the law to avoid another Brexit extension. We are expecting further volatility today and Parliament could be prorogued (closed) anytime between today and Thursday.
Nonfarm payrolls fell below the forecasts with just 130,000 jobs added in August, and July’s figure was revised down by 5,000 jobs. The unemployment rate was unchanged at 3.7%, as expected, although the participation rate increased and the household survey recorded a larger employment increase of 590,000 for the month. Average hourly earnings increased 0.4%, better than expectations of 0.3% and the annual increase printed 3.2% from an upwardly-revised 3.3% previously. The Dollar initially edged lower on the mixed data as the headline figure undermined US support.
After the European close, Fed Chair Powell reiterated that the central bank would take appropriate action to sustain the economic expansion. There were concerns over the impact of trade tariffs and expectations of low inflation, but the committee members opinions were diverse. Powell did nothing to dispel expectations of a rate cut next week and markets remained very confident of a further 0.25% cut.
The Euro failed to hold above 1.1050 on the Dollar and settled around 1.1030 with little change this morning. Germany recorded a larger than expected trade surplus with marginal gains for exports, but growth concerns persisted. This week, the markets focus will be Thursday’s ECB meeting which could see a small cut in the deposit (overnight) interest rate and QE being restarted.
Posted in Daily Market News on Sep 9 2019