Introduction: Pound at one-year high against weaker dollar
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The growing prospect of a US interest rate cut next month is buffeting the dollar, sending the pound up to its highest level in over a year.
The dollar lost more ground last night after the minutes of the Federal Reserve’s July meeting were released. They showed that the “vast majority” of policymakers felt it would probably be appropriate to cut rates in September, if economic data continued to come in as expected.
That knocked the dollar index – which tracks the greenback against major rivals including the euro, yen and sterling – to its lowest since last December.
That drove the pound up to $1.31 last night – the highest since July 2023.
Hopes of a September rate cut were further boosted yesterday by data showing that 818,000 fewer jobs had been created across America than previously thought.
Those revisions adds to concerns that the economy has been slowing.
The financial markets indicate there’s a 66% chance that the Fed begins with a quarter-point cut to borrowing costs in Septemember, and a 34% chance of a bumper half-point cut.
Traders are also pricing in a full percentage point cut in US rates by the end of the year – implying a half-point cut at one of the Fed’s three remaining meetings this year.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:
Because a jumbo rate cut wouldn’t arrive unless there is a deeper economic and financial trouble, the market pricing of the moment is unsustainable for either the US dollar – which has gone too low with the expectation of a 100bp cut, or the stock markets – which have gone too high with the same expectation disregarding the fact that economic trouble is never good for profitability.
Central bankers are gathering in Jackson Hole, Wyoming, today for a closely-watched economic symposium. Federal Reserve chair Jerome Powell speaks tomorrow, and is expected to give some guidance about how the Fed may act in the months ahead.
The agenda
-
9am BST: Eurozone flash PMI report for August
-
9.30am BST: UK flash PMI report for August
-
11am BST: CBI industrial trends report
-
12.30pm BST: ECB monetary policy committee meeting minutes are published
-
1.30pm BST: US weekly jobless report
Key events
FT: PwC braced for 6-month ban in China over Evergrande audit
PwC is preparing to face the music in China over its auditing of collapsed property developer Evergrande.
The Financial Times reports that PwC China has told clients it expects Chinese authorities to hit it with a six-month business ban, which could start as early as next month.
This would be the toughest ever action by Chinese regulators against a Big Four firm.
Back in March, China’s securities watchdog fined Evergrande for inflating its revenue by nearly $80 billion over two years before it defaulted on its debt.
Evergrande was forced into liquidation in late January after efforts to restructure its foreign debt failed, following pressure from Beijing for property firms to rein in excessive borrowing.
A six-month ban could be very disruptive for PwC’s China arm, the FT says:
PwC China was the country’s largest accounting firm by revenue in 2022, bringing in Rmb7.9bn ($1.1bn), according to government data.
The ban would prevent PwC China from signing off on financial results and initial public offerings and from conducting other regulated activities, multiple clients told the Financial Times. The firm has assured clients that staff will keep working during the suspension and will be able to certify the audit opinions on their 2024 annual reports once the ban is lifted in March.
More here.
Introduction: Pound at one-year high against weaker dollar
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The growing prospect of a US interest rate cut next month is buffeting the dollar, sending the pound up to its highest level in over a year.
The dollar lost more ground last night after the minutes of the Federal Reserve’s July meeting were released. They showed that the “vast majority” of policymakers felt it would probably be appropriate to cut rates in September, if economic data continued to come in as expected.
That knocked the dollar index – which tracks the greenback against major rivals including the euro, yen and sterling – to its lowest since last December.
That drove the pound up to $1.31 last night – the highest since July 2023.
Hopes of a September rate cut were further boosted yesterday by data showing that 818,000 fewer jobs had been created across America than previously thought.
Those revisions adds to concerns that the economy has been slowing.
The financial markets indicate there’s a 66% chance that the Fed begins with a quarter-point cut to borrowing costs in Septemember, and a 34% chance of a bumper half-point cut.
Traders are also pricing in a full percentage point cut in US rates by the end of the year – implying a half-point cut at one of the Fed’s three remaining meetings this year.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:
Because a jumbo rate cut wouldn’t arrive unless there is a deeper economic and financial trouble, the market pricing of the moment is unsustainable for either the US dollar – which has gone too low with the expectation of a 100bp cut, or the stock markets – which have gone too high with the same expectation disregarding the fact that economic trouble is never good for profitability.
Central bankers are gathering in Jackson Hole, Wyoming, today for a closely-watched economic symposium. Federal Reserve chair Jerome Powell speaks tomorrow, and is expected to give some guidance about how the Fed may act in the months ahead.
The agenda
-
9am BST: Eurozone flash PMI report for August
-
9.30am BST: UK flash PMI report for August
-
11am BST: CBI industrial trends report
-
12.30pm BST: ECB monetary policy committee meeting minutes are published
-
1.30pm BST: US weekly jobless report
