Daily Market Report 07/09/16

GBP

The pound gained for a fifth successive day against its major peers, the longest run since March this year. Key data releases regarding UK manufacturing and services have shed positive light over a previously gloomy outlook on the UK’s economy post-Brexit. This is only confirmed by the fact that Morgan Stanley and Credit Suisse have now followed suit with Goldman Sachs, by both stressing that the UK will prove more resilient than had been previously anticipated in the immediate aftermath following June 23rd and their revised growth figures. It seems, then, that there are two possible explanations for this. Either on the one hand the effects on the UK economy may have not yet fully materialised or, in the short term at least, the extent to which Brexit has impacted the UK has been overestimated. 
 

USD

In the US, the services industry in August has expanded at its weakest pace in six years, which along with less than expected manufacturing data, will fuel speculation of an economic slowdown and weak optimism for an interest rate hike in the short term. This shows, in the words of Ryan Sweet, a senior Moody’s analyst, that although “there’s no good news in this report”, “it is just one month” and that September will prove vital for the Fed’s decision making.
 

EUR

Wolfgang Schaeuble, Germany’s Finance Minister, left spectators in no doubt about his view on the state of the German economy during the government’s 2017 budget speech in parliament yesterday. Schaeuble cited that unemployment was at its lowest levels since the unification of Germany in 1990, as well as “healthy” economic growth, rising wages and strong retirement benefits. In fact, Schaeuble went as far as to say that “economically, we’ve never had it so good”. These strong economic indicators may help Merkel mitigate the damaging effect the handling of the refugee crisis has had on the party.
 

Key Announcements

09:30 – GBP - UK Manufacturing Production m/m expected to decrease to -0.4%

14:15 – GBP - UK Inflation Report Hearing