British economy stalled in July, missing market forecasts

The British economy stalled in July

This morning, fresh Office for National Statistics data revealed that the British economy stagnated for the second consecutive month in July, missing market forecasts of 0.2% growth. These figures will come as a blow to chancellor Rachel Reeves who has put economic expansion at the heart of the Labour party’s agenda.

Last night, US presidential candidates Kamala Harris and Donald Trump took to the stage at Philadelphia’s National Constitution Centre for the high-stakes debate. Democratic candidate Harris was clearly well prepared, as she grilled the former Republican president on a number of topics including abortion rights, immigration, the 2020 election, the Ukraine war and her ethnicity, which Trump formerly made comments about.

The dollar index slipped following the debate as investors reacted to the first and only debate between the US presidential hopefuls.

The pound remained on the back foot yesterday, marking marginal losses against the US dollar following a short-lived recovery attempt on UK unemployment data. However, following last night’s debate, sterling has started to climb, albeit marginally.

Manufacturing, industrial and construction output in the UK all fell more than expected month-over-month in July, falling by 1%, 0.8% and 1.6% respectively.

Small business optimism in the US plummeted in August to 91.2, the lowest rate in three months, compared to 93.7 in July and forecasts of 93.6. Almost one-quarter of small business owners reported inflation was their single biggest problem.

This afternoon, the spotlight is on the US inflation rate which is forecasted to slow for a fifth consecutive month to 2.7% in August, from 2.9% a month earlier. The core rate, which excludes food and fuel costs, is also anticipated to remain unchanged at 3.2%.

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GBP: Positive labour data supports pound but not for long

Shortly after the Office for National Statistics said the UK added 265,000 jobs in the three months to July, massively outperforming expectations of 123,000, the pound shot up against the US dollar almost immediately. However, it wasn’t long before expectations of Wednesday’s inflation data cast a shadow over sterling’s gains.

GBP/USD: the past year                   

EUR: Investors await ECB decision tomorrow

It’s been a relatively quiet week for the euro, with little high-impact economic and political releases to influence the single currency. That will all change tomorrow, however, as ECB policymakers will reassess their policy stance. The current rate is 4.25% as Bank members decided not to rush into rate cuts in July.

GBP/EUR: the past year

USD: Harris support grows slightly

Following last night’s debate, analysts suggest that the chances for a Harris presidency rose slightly, supported by expectations of increased fiscal spending and more tariffs under another Trump presidency. Today, markets gear up for the August consumer inflation report which could prove useful in estimating the likelihood of a Federal Reserve rate cut next week.

EUR/USD: the past year

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