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UK economic data and the ECB's policy meeting ratchet up attention on European currencies this week.
A risk-off tone in financial markets meant the US dollar rebounded from more disappointing labour figures to end Friday.
Over the course of last week’s trading, the pound traded in a narrow range against the euro to finish slightly down. GBP/USD neared its two-year high set in August before sliding back to end the week less than 0.5% up. EUR/USD also recorded a small advance.
A lower than expected result in US non-farm data would usually have resulted in a sizeable impact on the US dollar. However, while GBP/USD and EUR/USD spiked on Friday afternoon, those gains were quickly brushed aside in favour of safe trades.
The Federal Reserve would no doubt have been watching the numbers closely. Unemployment fell from 4.3% to 4.2% in August, and while non-farm payrolls increased to 142k last month from 89k in July, that was still many thousands under the forecast 160k.
The UK and Europe retake their places in the spotlight this week. For the pound, that means navigating a busy schedule of high-profile data. The stakes are even higher for the euro, with the European Central Bank’s interest rate meeting set to have a huge say on its trajectory.
European mortgage lending is expected to have flatlined in 2024, down from growth of 4.9% as recently 2022, according to a study by EY. Borrowers have been put off opening new mortgages due to elevated interest rates, although growth is expected to return next year. The previous lowest rate of growth was 0.2% in 2014.
Kamala Harris and Donald Trump will square off this week in their first (and likely last) televised debate. Harris is under pressure to perform, both because of her predecessor’s disastrous showing and recent polling that suggests her initial momentum is starting to slow.
Here’s what to look out for this week…
Significant UK data makes a return beginning with July’s unemployment report tomorrow.
That’s swiftly followed by UK GDP data with growth in July expected to tally around 0.2%. US inflation follows in the afternoon, which could provide another dose of market volatility.
On Thursday the European Central Bank will announce its latest interest rate decision. The consensus is currently for another 0.25% cut to rates, but markets have been mistaken many times before.
US PPI and September’s preliminary Michigan consumer sentiment survey are the highlights at the end of the week.
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GBP: Desperate for growth
The new Labour government are desperate for some economic good news after adopting doom and gloom messaging. July’s GDP figures are expected to present an improvement from June’s zero growth, although there is far more potential to be tapped down the line.
GBP/USD: the past year
EUR: Rate cut expected
August’s committee minutes from the European Central Bank set the stage for a cut of 0.25% this week. The euro has performed well against the US dollar in particular to start the month. That platform could now be at risk.
GBP/EUR: the past year
USD: Inflation the key test
Wednesday’s inflation figures could be key in determining the speed of the Federal Reserve’s interest rate loosening. The headline figure is expected to fall from 2.9% to 2.7%, but a miss either way could send ripples through to the next decision.
EUR/USD: the past year
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