Key Points from This Week
Over the week, GBP has been the weakest performing G10 currency, dragged down by continued Brexit uncertainty and a tumultuous domestic political landscape. On the other hand, JPY was the strongest performer over the week in which most currencies lost against USD.
UK Supreme Court Ruled Against Johnson
UK Supreme Court judges this week returned the verdict over the case of whether the UK PM prorogued parliament illegally. While some were expecting the court to rule against Johnson, it was an unexpected outcome for the court to deliver a unanimous decision against the PM. With that decision, the court ruled that Johnson proroguing parliament was a judicial matter, not just a political one, and parliament was still active. Consequently, parliament returned the next day. However, Johnson is now threatening to prorogue parliament again, arguing that a Queen’s speech is needed to outline his domestic policies.
Trump Impeachment Proceedings Begin
Nancy Pelosi this week announced that she has formally commenced an impeachment enquiry into the President’s interaction with the President of Ukraine regarding his alleged request for help to undermine former Vice President Joe Biden who is leading the current Democrat party race. The accusation is that Trump froze military aid to Ukraine ahead of the conversation to use as leverage. Trump admits talking with the Ukranian leader and has promised to release full transcripts of the call. However, only a summary has been released so far.
Conflicting Trade War Comments
The latest headlines pertaining to US – Sino relations have been mixed. During his speech to the UN General Assembly this week, Trump attacked China over its failure to implement reforms and to co-operate with the US. China meanwhile, said that it expected all trade tariffs to be removed before a deal could be done. These comments have created uncertainty about the prospect of a deal as it seems difficult to see where the two sides will compromise. However, Trump followed up on these comments saying that a deal with China could come sooner than many are expecting.
Key Events Next Week
RBA rate decision
The September RBA meeting next week is drawing split opinions over whether the bank will cut further. While the bank has recently been on hold, Governor Lowe has reiterated his message that further easing could be done if necessary. With all four major Australian banks calling for a cut it seems prudent to note downside risks into this meeting.
On Friday we have the headline US employment reports. The NFP release is expected to jump from 130 prior to 162k last month. Keep an eye on wage growth, however, which is forecast to have fallen back from 3.2% to 3.1% which could blunt the upside impact of a strong NFP reading.
The next inflation reading from the eurozone will also be carefully watched next week. Analysts are looking for a small increase in the core reading to 1% from 0.9% prior. Inflation has remained stubbornly subdued over recent months, leading the ECB to announce further easing at its September meeting. Any weakness in this data will keep expectations of further easing intact.
Keep An Eye On
Spread across the week we will receive a range of incoming PMI sets from China, the Eurozone, the US and the UK. These releases could have a big impact on general risk sentiment, giving an insight into the health of economic activity around the globe over September. Priority attention will be the US manufacturing PMI on Tuesday which is forecast to print 50.4, if this disappoints we could see the sector moving into contractionary territory.
Please note that this material is provided for informational purposes only and should not be considered as investment advice. The views discussed in the above article are those of our analysts and are not shared by Tickmill. Trading in the financial markets is very risky