Sterling was becalmed yesterday against the euro and US dollar. The dollar itself weakened by around 0.25% against major currencies as America’s labour market appeared to loosen further. The euro gained against all but sterling, as a notably safe pair of hands was appointed prime minister of France and there were indications that the European Central Bank (ECB) will hold interest rates in October.
It wasn’t really the weather for working outside yesterday, but other than that the UK house-building industry was shown to be a solid part of the UK economy. A report from S&P Global showed UK construction rising at its highest pace for two years, boosted by lower borrowing costs and the tail-end of the post-election bounce. Also yesterday, the cheapest five-year mortgage for two years was announced, with the NatWest offering 3.71%.
This morning the Halifax House Price Index has moved up by 0.3% in August to an 4.3% annual rise.
Those were the only major data report from the UK; the calm before the storm of next week’s employment, earnings and GDP reports.
The arrival of miserable weather will not have helped the new Chancellor, as Rachel Reeves fends off calls to reverse the axing of winter fuel payments for most pensioners.
From the US, where investors are looking for signals on whether it’s heading into recession, ISM Services PMI edged slightly higher. On the other hand, there were three reports on US jobs which somewhat unhelpfully contradicted each other. Surging job cuts were reported by US companies in one, but fewer new unemployment claims than expected in another, plus fewer new jobs coming onstream than expected in yet another report. This afternoon we will hear Non-Farm Payrolls, the most influential monthly jobs report of them all.
On the other side of the Channel, President Macron announced Michel “Monsieur Brexit” Barnier as new prime minister of France. The end of Macron’s centrist party’s majority weakened the euro sharply in June, but his choice of Barnier seems to have given the market some confidence. In France’s current three-way parliamentary split between far left, far right and centre, Barnier’s relatively right-wing stance on some issues might even see him survive with far-right support.
Germany’s Balance of Trade has just been announced to have narrowed to €16.8bn in July, down from over €20bn in June. It’s the lowest level for over 18 months, as exports grew less than imports.
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