Written by: Kingsley Walker
The US returns to work after Labour Day and the Chinese market continues to frighten the global economy, Chinese imports in August fell 14.3% from a year ago and exports fell by 6.1%. In monetary terms this left the economy with a trade surplus of $60.24bn however, the drop in imports was not expected and signals the continued slowdown in the economy. The continued negative data releases from China will undoubtedly have a bearing at the upcoming Fed meeting which is taking place on September 16th.
Friday’s employment data came in under forecasts at 173,000 however, was proceeded by two strong readings which beat forecasts. At their upcoming meeting the Fed will have to weigh up when to tighten monetary policy amid the global turmoil in China and emerging economies. Futures markets are still indicating that the chance of a rate hike is still well below 50% however the perspective could shift if there is strong US data over the coming days leading up to the meeting. Reaction to the jobs data was fairly muted on Friday and saw the dollar gain marginally against the pound with rates dropping to 1.5167. These gains were short lived over the course of the weekend and sterling strengthened and broke the 1.53 level touching 1.5387.
GBP/USD Exchange rate
A fairly quiet start to the week from the UK with no real data of note to move GBP/USD, sterling has strengthened off the back of investors moving away from the USD and moving into sterling as China continues to cause uncertainty in the markets. Expect to see a degree of volatility towards the latter part of the week as we have rate decisions and statements from the Bank of England and a speech from Bank of England head Mark Carney. Comments and decisions from the BoE will be watched closely as investors look to get any hint as to when the UK may tighten monetary policy.
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This week’s data
Today we have a few minor pieces of data from the US with labour market conditions and consumer credit figures. Wednesday and Thursday we have key data from the UK with manufacturing production numbers followed on Thursday by the MPC rate decision and statement with unemployment claims from the US after. Strong comments and data from even of these two economies will heighten the calls for a move in monetary policy. Check back to see how these data releases and speeches will move GBP/USD exchange rates over the next week.