Last week we saw the focus on the UK with both Brexit, growing COVID concern and the economic support mechanisms being discussed. PM Johnson announced a tightening of restrictions in England, while other parts of the UK also made some changes. Chancellor Sunak followed this up by announcing further support mechanisms to help following the end of the furlough scheme which expires at the end of October. There was also an extension of the VAT cut for the hospitality sector until March, and some changes to the lending schemes for businesses. Meanwhile, news on the Brexit front was more positive despite the Internal Markets Bill. It has been reported that a Brexit deal is in touching distance.

There was generally a risk-off tone in the market as COVID cases across Europe continue to soar with Spain and France reporting over 10,000 rolling 7-day averages. Economic data over the past few months have generally pointed to a stronger-than-expected initial rebound in economic activity in the UK, US and the Eurozone. German September IFO survey showed rises in current conditions and expectations, UK GfK consumer confidence measure rose to a six-month high in September and US manufacturing PMI rose.

Looking to the week scheduled to see another set of ‘formal’ negotiations between the UK and the EU on the long-run relationship. Some reports this week have pointed to breakthroughs on some key sticking points. However, the situation remains uncertain and the late December deadline for the end of the transition phase is fast approaching. In the meantime, ongoing COVID news is likely to dominate as new cases in Europe surge as do discussions surrounding major city restrictions.

Monday

  • ECB President Lagarde Speaks

Largarde is due to deliver an introductory statement at the ECON committee of the European Parliament in Brussels. As head of the ECB, which controls short term interest rates, she has more influence over the euro’s value than any other person.

Tuesday

  • UK Mortgage Approvals
  • US Consumer Confidence

The housing market will be scrutinised today during these COVID conditions. Given the recent stamp duty holiday it is expected that a further pick up in mortgage approvals should happen.

As we nudge closer to the US election consumer confidence will be closely watched as COVID conditions continue to play their part.

Wednesday

  • UK and US GDP
  • US ADP Employment Report

The final reading UK and US Q2 GDP is set to announce which is expected to confirm that the UK contracted by 20.4% and the US by 31.7%. The ADP employment for the US is due for release which could provide the market with some early insight ahead of the all-important labour numbers on Friday. The headline figure is expected at 650k, although it is rare for the market to react as there tends to be a degree of divergence from the official numbers on Friday. This also has another role to play in the opinion polls as we head toward the November elections between Trump and Biden.

Thursday

  • EU Unemployment Data
  • US Weekly Jobless Claims
  • US Personal Spending
  • US ISM Manufacturing 

With the second wave of COVID becoming more apparent in Europe the market will focus on indicators such as unemployment for a grasp on the wider impact on the economy as we enter autumn. The US weekly jobless claims remain elevated which in turn could affect US personal spending. The US ISM Manufacturing will be closely watched as an indicator of economic activity.

Friday

  • Spanish Unemployment
  • Eurozone CPI (inflation)
  • US Non-Farm Payrolls and Labour Data

The headline data point of the week is set for release today: US Non-Farm Payrolls and the labour data. It is expected that we will see the pace of job growth slow with a figure of 900k down from last month’s reading of 1371k. This metric could be quite important as this is the penultimate labour reading before the election. In Europe, the big increase in COVID new cases in Spain may result in higher unemployment. The Eurozone inflation data will come under scrutiny following comments from the market about the concern of the Euro strength and how this applies downward pressure to inflation.

Read our Monthly FX Forecast for a longer-term view of currency movement.

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