September 1, 2022

“Today’s main release will be the US manufacturing for August, which is expected to edge slightly lower, but remain in expansion mode. The Eurozone unemployment rate for July is projected to remain at 6.6%. Unless we are in for a surprise, the data will likely have little impact on FX markets.”  

Sam Cornford, Partner – Head of Trading

Main Headlines

Nearly two years after he defeated Donald Trump, President Joe Biden has some unfinished business he’s aiming to settle with the restive forces of Trumpism. The president is set to use a primetime address today to frame the upcoming midterm elections as part of an ongoing battle for the “soul of the nation”, a reprise of his 2020 campaign theme that he’s now using to cast the current stakes in as dire terms as those that sent him to the Oval Office two years ago.

In the UK, Liz Truss ruled out introducing any new taxes or rationing energy this winter if she becomes the UK’s next prime minister, making two eye-catching pledges in her final pitch to win the post. Truss, who is the bookmakers’ favourite to succeed Boris Johnson, made the commitments at the last Conservative Party leadership hustings in London yesterday, ahead of the victor being announced Sept 5.

GBP

Sterling is weaker than most major currencies in the early morning trade. UK house prices rose more than expected in August, with estate agents reporting only a modest slowdown in the market despite the cost-of-living crisis. Nationwide Building Society said the average cost of a home rose 0.8 per cent in August to £273,751 (S$444,353), the 13th consecutive monthly increase. A rise of just 0.1 per cent was forecasted by economists. The annual pace of gains slowed to 10 per cent from 11 per cent.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. The Russian state-owned energy giant, Gazprom, said the restrictions on the Nord Stream 1 pipeline would last for the next three days. Russia has already significantly reduced gas exports via the pipeline. The president of Germany’s network regulator has said the country will be able to cope, if Russia resumes delivery in the coming days. European leaders fear Russia could extend the outage in an attempt to drive up gas prices, which have already risen sharply in the past year.

USD

The dollar is well bid against most major currencies overnight. The dollar index, a measure of the currency’s value against a number of others, is up 14 percent since the beginning of the year. It has continued to rise on expectations that the Federal Reserve will not back down from raising US interest rates to curb inflation, as highlighted by Chairman Jay Powell at the annual Jackson Hole symposium last week. The US currency’s lead over other currencies also reflects concerns that rising energy prices in Europe, fuelled by Russia’s war in Ukraine, will drive inflation and push economies into recession.

Markets

Investor sentiment continued to hold a risk averse tone yesterday. Concerns that Russia will not restart supplying Europe with gas through the Nord Stream 1 pipeline following three-days of maintenance, which commenced yesterday, contributed to the Euro Stoxx 50 losing 1.3%. The S&P 500 finished down 0.8%. Elsewhere, oil declined by circa 3%, moving back towards $96 per barrel on growing fears of a global recession.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: UK August Nationwide House Price Index
8:00 a.m.: Russia August Manufacturing PMI
8:30 a.m.: Sweden August Manufacturing PMI
8:30 a.m.: Switzerland August CPI
9:00 a.m.: Hungary 2Q GDP, Aug. manufacturing PMI, one-week deposit rate
9:45 a.m.: Italy August Manufacturing PMI
9:50 a.m.: France August Manufacturing PMI
9:55 a.m.: Germany August Manufacturing PMI
10:00 a.m.: Euro-Area August Manufacturing PMI
10:30 a.m.: UK August Manufacturing PMI
10:30 a.m.: BOE’s decision maker survey
11:00 a.m.: Euro-Area July unemployment
11:00 a.m.: Italy 2Q GDP
12:30 p.m.: ECB’s Centeno speaks
2:30 p.m.: US initial jobless claims
3:30 p.m.: Riksbank’s Ingves speaks
3:45 p.m.: US August Manufacturing PMI
4:00 p.m.: US July construction spending, ISM Manufacturing

Corporate Events

Earnings include Broadcom, Campbell Soup

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