GBP - British Pound
With a plethora of weak survey data out last week, the OECD has stated that global growth remains fragile and uncertain in their latest update on the world economy. Global recession has come into question this week, after UK and Eurozone PMI data came out weaker than expected last week, as well as US ISM data. Of particular concern was the weakness in the dominant services sector across these economies, and the resultant impact on employment and consumer spending.
Last week's non-farms payroll data from the US showed early signs of supporting these concerns, with employment data from the US some of the weakest we had seen in nearly 50 years. The stock markets are becoming increasingly concerned about global growth, with global markets all in the red last week. Bond yields have resumed their decline as markets price in further cuts from the major central banks. The OECD reduced global growth forecasts for 2019 and 2020, with growth projected to slow from 3.6% in 2018 to 2.9% and 3% in 2020.
With economic data being relatively quiet this week, focus will remain on political uncertainty. The important data points come from Thursday in the UK, when we will have the latest estimate of UK GDP. The UK flirted with a technical recession in the last reading, but an unexpected 0.3% positive reading abated these fears, at least in the short term. We are expecting a reading of 0.1% on Thursday, with a weaker reading expected after the weak PMI data last week. The Eurozone sees industrial production figures from Germany, France and Italy. The market will also take note of the ECB's account of its September meeting for its next move in regards to monetary policy and any rate cuts.
Global growth isn't the only area in question. Global political uncertainty has clearly ramped up, with protests in Hong Kong taking another turn for the worst, after a controversial colonial era ban on wearing masks at rallies sparked fresh civil unrest. North Korea has also issued fresh warnings aimed at the US after talks about their nuclear capability fell apart. To add to the mix, the US have issued a round of tariffs targeting imports from Europe. Could this be the start of a US Europe trade war?
GBP could see real action this week after UK Prime Minister Boris Johnson has reiterated that the UK will leave Europe on 31st of October, with or without their blessings. The latest proposal needs to be approved by October 11th, but with Johnson's mild concessions, Brussels is expected to reject the latest deal. Last week saw the pound buoyed by Johnson's alternative to the Irish backstop, which received some positive feedback from Brussels, but with plenty of concerns from the likes of the Irish Taoiseach, it's difficult to see if such proposals are close to being approved.
The Euro has been deeply oversold recently which paves the way for a possible retracement. Some of this will be down to the rhetoric from the European Central Bank and their monetary policy stance moving forward. Rate cuts are very much in the frame, but a we could also see a ramping up of their quantitative easing programme.
1.2260 - 1.2370 ▼GBP/EUR:
1.1170 - 1.1330 ▲GBP/AUD:
1.8160 - 1.8340 ▲GBP/NZD:
1.9420 - 1.9710 ▲GBP/CAD:
1.6340 - 1.6550 ▲