The pound enters a key week that centres around the autumn budget, the Labour government’s first major economic moment and one that threatens whatever fragile recovery sterling made in the back half of last week.
Overall, GBP/EUR shook off a couple of peaks and valleys to stay close to unchanged last week. Sterling and the euro each lost around a third of a per cent to the US dollar, which continues to benefit from the scramble to predict the next president.
UK chancellor Rachel Reeves gave the strongest indication yet that Labour would ease stringent debt restrictions to increase investment last week. It’s also widely believed that employer national insurance contributions are set to rise, two decisions that could easily knock the pound down against its closest rivals.
Germany’s economy was given a boost by signs of an improvement in the manufacturing sector. The German Ifo business climate survey rose this month for the first time in five months, driven by “noticeably less pessimistic expectations” among manufacturers.
US durable goods orders declined by 0.8% in September following a fall of the same scale in August. That news was greeted with relief rather than disappointment, as the consensus forecast among economists was actually for an ever larger fall in output.
Recent polling shows next week’s presidential election pulling ever tighter. Several well-regarded pollsters, including the New York Times joint survey with Sienna, now have Kamala Harris and Donald Trump tied in the popular vote, an eventuality many had disregarded as recently as a few weeks ago. The race remains essentially tied in the seven swing states that will determine the next president.
With the possibility of a second Trump presidency becoming more real by the day, markets have scrambled to protect themselves from risks with so-called “Trump trades”. You can read more about how this dynamic might impact Europe in the euro section below.
Here’s what to look for this week…
The key event for the UK is the autumn budget on Wednesday, which will be closely watched as a barometer for the (relatively) new government’s fiscal roadmap.
The eurozone must navigate a busy schedule that sees the German Gfk consumer confidence study on Tuesday along with GDP and inflation figures in its largest economies across Wednesday and Thursday.
Things are hectic across the Atlantic too. The JOLTs jobs report and third quarter GDP figures feature on Tuesday and Wednesday before the Core PCE price index and unemployment numbers close out the week.
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