By Noam Bennaiche
Having seemed to be in the ascendancy, the US Dollar has stuttered and its current decline is being driven by mounting expectations of Federal Reserve interest rate cuts, ongoing US-China trade tensions and a government shutdown now into its 17th day.
In the commodities sector, West Texas intermediate crude remained under pressure on Thursday, retreating toward the $57.40 per barrel mark, the lowest level in five months. Gold continued its bullish trajectory, surging to new record highs on the back of strong safe-haven demand. Persistent geopolitical tensions and growing macroeconomic uncertainties continue to boost gold’s appeal.
The Pound strengthened following the release of the UK’s monthly Gross Domestic Product and factory output data for August. The UK economy grew by 0.1% in August, in line with expectations and matching July’s contraction.
Industrial production rose by 0.4% month-on-month, beating forecasts of 0.2%, after a 0.4% decline in July. On an annual basis, industrial production contracted by 0.7% – steeper than the expected 0.6% decline and a notable drop from July’s 0.1% decrease. Manufacturing production performed more robustly, growing by 0.7% in August versus expectations of a 0.4% increase, following a 1.1% decline in July.
This modest recovery in manufacturing and slight GDP growth offers temporary support for the Pound. However, this relief may be short-lived, with the government set to unveil its Autumn Budget next month, widely expected to include significant tax increases. The Pound’s recent gains against most G10 currencies remains fragile. Speak with your currency consultant today for more insights.
Looking ahead, the final inflation rate for the Euro area will be a key focus for today, with the release scheduled for 11 am. Across the pond, US economic data remains delayed due to the ongoing government shutdown. Bank of England official Huw Pill is scheduled to speak in London on the UK and global economic outlook, highlighting key risks and opportunities. Later in the day, during the annual meetings of the International Monetary Fund and World Bank Group in Washington, speeches will be delivered by BoE Monetary Policy Committee member Catherine Mann and Bundesbank President Joachim Nagel.
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