Holidays are over, back to reality

Good morning

I’m back in the office after two weeks of travelling Europe with friends which took in some of the sights of Croatia, Italy and Spain.  We stayed in some incredible places, feel free to ask if you’re looking for holiday accommodation as I may just have a couple of gems up my sleeve.  One town in Croatia, Cavtat, which I have to admit I had never heard of, is only a couple of miles from the airport, and has a calm, peaceful feel, ideal for a short weekend break, particularly in the apartment we had which had a rooftop infinity pool overlooking the bay, the sea and Dubrovnik in the distance. 

Anyway, to the markets and what I’ve missed while I’ve been away.  The overriding theme seems to be one of USD weakness, triggered by heightened US rate cut expectations.  A cut in September is pretty much a given, the question remains of whether we see a 25bps or 50bps cut.  Powell and his colleagues have made it clear that while they are of course watching inflation, it is the labour market they are perhaps more concerned about.  As such, this weeks employment numbers will be closely watched ahead of the 18th Sept rate meeting, with JOLTS, ADP and the main event, nonfarms payrolls. 

Other than the employment numbers, we’ll also have the latest ISM PMIs from the US this week.  It is actually a holiday in the US today so we may have a quiet afternoon but it is likely to get busier as the week goes on. 

In other news, the German right wing AfD party saw success in the regional elections over the weekend, the first right-win victory in a state parliament election since world war II.  They also came very close in the Saxony, where they achieved 30.6% of the vote, just behind CDU with 31.9%.  As we saw in France recently, the other parties who failed to score well are looking to pool resources to prevent as AfD victory in the Brandenburg elections in three weeks time.

 China and Philippines are still at odds in the South China Seas with both sides blaming each other for a collision between two vessels.  It might be unfair but I’m thinking China were probably to blame.  In Israel there is pressure on the government to find a peace deal that would see hostages returned after the bodies of six Israeli hostages were discovered in a tunnel in South Gaza.  In Ukraine, Russia are reported to be making gains, while Ukraine still hold parts of Russia.  The key issue still seems to be whether Ukraine can use Western weapons to strike deep into Russia itself. 

In sport, Man City and Liverpool have started the season with three wins out of three.  Spurs are stuck in mid-table after losing to Newcastle over the weekend, not exactly the start we were hoping for.  While I was away we went to see Barcelona play a league match against Real Valladolid.  Barcelona strolled away with a 7-0 win, great for the home fans but as a footballing spectacle and of course a good experience for us, but it wasn’t close to the excitement and pace of the Premier league. 

I’m going to leave it there for now.  It’s difficult to get back into the swing of things after a couple of weeks off and I run the risk of just wittering on about nothing important.  I’ll leave you with the currency levels now compared to the day I left.  The weaker US dollar is clear to see.

GBPUSD 1.3140 (1.2875), EURUSUD 1.1075 (1.0980), USDJPY 146.45 (149.00), GBPEUR 1.18765 (1.1725), GBPJPY 192.45 (191.80), GBPAUD 1.9375 (1.9420), GBPNZD 2.1085 (2.1400), GBPCAD 1.7725 (1.7670), XAUUSD 2,500 (2,450).

Have a great day

-  09.00 German manufacturing PMI

-  00.01 UK BRC retail sales