Who will be prime minister in France?
Hello from London! 🇬🇧
After the summer break we continue our tour of the EEA with this time a little trip to the cattedrale di Santa Maria del Fiore in Florence, Italy. Having visited the city and the cathedral myself a few years ago, I can honestly say it was one of my most beautiful trip and can only recommend it.
Here's a quick recap of the recent movement on the main pairs, economic news and what to expect for the week ahead.
🇬🇧 GBP
The summer has been rich in news in the United Kingdom as Keir Starmer settled in his new role of Prime Minister in the UK. They have already been plans to re-nationalise railways and create a public company called "Great British Railways" as well as other measure destined to boost the re-industrialisation of Britain.
It is with this in mind that the prime minister visited Germany and France last week, with the hope of renewing the dialogue with the European Union after a difficult relationship between the previous conservative leadership and EU leaders.
The Kingdom saw GDP grow 0.6% QoQ and 0.9% YoY in Q2, with CPI staying at 2.2% in July, close to the desired level from the Bank of England. Core CPI remains above the wanted level at 3.3%, casting doubts about rate cuts in the near future, and unemployment remains at 4.2%, showing that the rate increases have had little to no impact on the job market in the UK.
Today, the manufacturing PMI came out at 52.5, a 26-month high as domestic demand increases. The composite and Services PMIs will both come out on Wednesday, with both expected in expansion around 53.3/53.4 and the construction PMI will come out on Thursday, again expected in expansion.
Cable is currently trading around the 1.31 mark and GBPEUR around the high 1.18 mark.
🇪🇺 EUR
The summer was rich in news in Europe with elections in a multitude of countries and the Olympic games in Paris
The EU unemployment rate dropped slightly to 6.4% in August, with CPI around the desired ECB level of 2.2%.
This is well reflected in the Spanish CPI (2.2%), French (2.2%) and German CPI (1.9%). France also saw its economy grow by 1% YoY and 0.2% QoQ in Q2. However, uncertainty remains with the parliament still hung after general elections in July saw the left alliance gain a relative majority but disagree on a coalition leader to become prime minister. At this point Bernard Cazeneuve and Xavier Bertrand are being considered for the role, with Macron meeting with former presidents François Hollande and Nicolas Sarkozy for consultation.
Germany is also facing political instability, with the AfD winning the state elections in Thuringe with 33% of the votes, and a close second with 31% if the votes in Saxony. The AfD (Alternativ für Deutschland) is a far-right party rejecting immigration and often described as a populist, xenophobic party with some sympathisers linked to neo-Nazi movements. This prompted the German chancellor Olaf Scholz to call for an alliance against the party.
Recommended by LinkedIn
Furthermore, Germany is in dire economic situation since the pandemic, with orders from China drastically reducing, and its automobile sector more and more at the mercy of EVs from China.
German unemployment rose to 6.0% in August, although that could be attribute to seasonality in the summer, but the GDP YoY stagnated at 0.0% and QoQ it decreased by -0.1% in Q2. Even with low inflation this means the German economy is shrinking.
EURUSD is currently trading around the mid 1.10 and EURCHF around the 0.94 mark.
🇺🇸 USD
Today is Labor Day in the United States, but the past month was dominated by the presidential race between Donald Trump and Kamala Harris, after Biden dropped from the race earlier this summer.
From an economic perspective, the US economy remains strong with a GDP growth QoQ in Q2 of 3.0%, but the country is still struggling against inflation with a Core PCE of 2.8% and inflation remaining around 2.9% in August, casting doubts over a Fed rate cut in the near future, pushing the dollar weaker against the Euro, Pound Sterling and the Swiss Franc.
Open rates week 02/09/2024:
Get in touch
If you would like to have better management over your foreign exchange exposure, at GPS Capital Markets, LLC we can help with netting solutions, options, forward contracts and FX credit lines contact me at jdufour@gpsfx.com or call me on +44 (0)20 3146 1476 or book a meeting with me at this link: Book time with Julien Dufour: FX Risk & Treasury Management | GPS Capital Markets
Learn more about our cash flow hedging solutions with this video: GPS Capital Markets - Cash Flow Hedging Solution