You might think it’s possible to track the success of the government’s Brexit strategy via the currency markets. Indeed, most of us when seeing a sudden shift in the pound’s value immediately assume it is Brexit related – usually rightly. But there are still other games going on around the world.
In the US, our old friend “non-farm payrolls” were disappointing last week for both August and July. It may seem like an arcane measure, but US jobs are a measure of economic success. The basic story in the US is that President Trump needs to stave off a likely economic downturn to get re-elected next year. He blames his own central bank, the Federal Reserve, for its failure to stimulate the economy. They, in return, blame his trade war with China.
Similar issues in the Eurozone. We’ll be watching the European Central Bank policy meeting on Thursday to see how far they will go in stimulating the European economy. Will it revive its quantitative easing programme?
And in the UK, aside from Brexit, we have a lot of economic data this week, including GDP for July, industrial production and employment data.
Brexit is still the biggest factor though, and the pound looks finely poised between reducing worries about a no-deal Brexit and increased worries about a General Election. Amber Rudd resigned, complaining that the energy being expended on no-deal planning is at the expense of planning for a deal. But some might see that as a positive. Maybe no deal won’t be so bad with all this planning going ahead?
Either way, many analysts are predicting a small boost to sterling this week. Therefore, if you have a major transaction planned in the year ahead it will definitely be worth contacting your trader on 020 7898 0541 to talk through your options and be ready to make a forward contract.
