Sterling navigated an onslaught of economic data last week to emerge stronger on the other side. The pound climbed by 0.5% against the euro while also rallying to the tune of one cent against the US dollar over the course of the week.
The UK reported on unemployment, inflation, GDP and retail sales last week. Clearing those hurdles certainly gives the pound some much-needed momentum, yet it remains in thrall to key events beyond its control, as well as the threat of more volatility.
On Friday, American consumers gave currency markets more reason to conclude talk of a recession was overblown. Consumer sentiment (as measured by the University of Michigan survey) rose for the first time in five months.
After the trauma of early August, last week was an altogether happier one for financial markets. Stock markets in particular benefitted from the improved mood, posting arguably their best week of 2024.
Fears of an imminent recession in the US were soothed by resilient retail data and the lowest read in the initial jobless report for six weeks.
The price of gold last week crossed the $2500 per troy ounce threshold for the first time. Gold and other safe commodities tend to do very well at times of market stress, underlining the fact that the global economy is not out of the woods just yet.
Here’s what to look out for this week…
As tends to happen after an extremely busy week for economic data, there’s rather less for markets to sink their teeth into this time around. Investors will no doubt turn their attention to smaller data points on Monday and Tuesday, but it isn’t until later that things really start to heat up.
FOMC minutes from the Federal Reserve arrive on Wednesday. This will likely become the subject of furious discussion, with policymakers set to pack their bags for their key meeting in Wyoming.
German manufacturing PMI will be a key focus on Thursday morning, as will PMI for the UK’s services and manufacturing sectors.
Nobody is under any illusions as to the biggest event of the week, however. The Federal Reserve’s annual Jackson Hole symposium kicks off on Thursday and media scrutiny, as ever, will be high. Given recent calls for emergency rate cuts, you can expect the fate of the US dollar (and indeed that of other currencies) to rest heavily on these events.
Last-ditch negotiations to avert an escalation in the conflict in the Middle East could also impact currency markets. The Democratic National Convention also kicks off today as Kamala Harris looks to build on her impressive momentum in the polls.
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