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January 31 – With the House of Representatives in recess and unable to consider the appropriations bill, the U.S. federal government entered a technical, partial shutdown at midnight local time on January 31. Analysts point out that although the shutdown is expected to be short-lived, it once again highlights the structural predicament of U.S. fiscal politics. In recent years, temporary funding, short-term extensions, and marginal shutdowns have become the norm in congressional budget battles, with government operations frequently hampered by political disagreements. Currently, the market generally believes that the direct impact of this technical shutdown on financial markets and economic operations is limited, but if subsequent congressional negotiations are again stalled, the risk of a prolonged shutdown and a wider impact cannot be ruled out.January 31st - The US government officially began a partial shutdown early this morning local time. This followed the Senates passage of a spending bill to fund most federal government departments, which was then submitted to the House of Representatives for consideration. However, because House members were not in Washington and would not return until Monday (February 2nd), the Senate vote could not prevent a partial government shutdown.January 31st - According to the UKs Daily Telegraph, British Prime Minister Keir Starmer responded to US President Trumps remarks on Sino-British cooperation in Shanghai on the 30th, stating that ignoring China would be "unwise." "It would be unwise to simply say we should ignore it. You know, French President Macron has already visited (China) and had exchanges, and German Chancellor Merz is also coming to exchange views," Starmer said. "It would not be in our national interest for Britain to be the only country refusing to engage (with China)." Starmer added, "In the past 24 hours, the opening of market access has been warmly welcomed by the business community. They have reported a change in the atmosphere and a significant increase in willingness to cooperate. This is good for our economy."On January 31st, China Merchants Securities, in its latest research report, also pointed out that its team recently surveyed liquor distribution channels in Henan, Anhui, Sichuan, and other regions. Overall demand is still declining (double-digit decline), but this is in line with previous expectations. Looking at different scenarios, business banquets are mainly small-scale events, mid-to-high-end dining remains sluggish, and gift-giving demand has partially rebounded. There is a clear differentiation among brands, with Moutai showing excellent sales performance due to pre-emptive stockpiling for the Spring Festival, while other brands are under pressure.On January 31, Michal Baltek, Vice Chairman of the Defense and Security Committee of the Slovak Parliament, stated in an interview with a reporter from China Central Television that the dispute surrounding Greenland is no longer merely a territorial or security issue, but reflects deep-seated challenges to US-EU relations, European strategic autonomy, and the international rules-based system. Baltek also stated that the USs use of trade tools to exert political pressure not only violates the spirit of international law but also undermines the rules-based international trading system.

GBP/USD fell to levels not seen in two years due to recession fears and pre-NFP instability

Alina Haynes

Sep 02, 2022 14:44

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The U.S. labor market report for August is the most crucial report of the month. After hitting a two-year low the day before, the British pound stabilized in the 1.1540-1.1550 region throughout Friday's Asian session. Despite impending recessionary fears in the UK, the Cable pair typifies the typical pre-NFP fluctuations.

 

As Bloomberg reports, "the United Kingdom is already in a recession, and inflation is likely to reach 14% later this year," citing BCC data. Unless the next prime minister takes "urgent" action to decrease skyrocketing energy bills, a coalition of groups called "End Fuel Poverty" has warned that the number of UK families in fuel poverty would more than double in January, to at least 12 million.

 

British Foreign Minister and potential future Prime Minister Liz Truss recently stated in a late Wednesday Sun article that she will provide "immediate support" to ensure that households do not incur excessive heating costs this winter.

 

In addition to high US Treasury yields, improved US data and hawkish Fed predictions acted as a drag on the GBP/USD exchange market.

 

President of the Atlanta Fed, Raphael Bostic, meanwhile, has said that the Fed still has a "long way" to go before inflation reaches 2%. As other conservative US central bankers have said, "Restoring price stability is our top aim," so has Lory Logan, the recently appointed president of the Dallas Fed.

 

The statistics for August showed that the US ISM Manufacturing PMI came in at 52.8, beating market expectations of 52.0. As a plus, the final S&P Manufacturing PMI index for August was 51.5, up from 52.2 in July and above the consensus estimate of 51. Similarly, the number of initial claims for unemployment insurance in the United States fell to 232k from 248k in the prior week and 237k the week before that. In addition, during the second quarter (Q2), Unit Labor Cost climbed by 10.2% QoQ, which was somewhat higher than the predicted growth of 10.7%; nevertheless, Labor Productivity fell by 4.1% QoQ, which was lower than the expected decline of 4.5% and the decrease of -4.7% in the first quarter.

 

Despite a mixed day on Wall Street, 10-year US Treasury rates rose to their highest levels since late June. And most significantly, the two-year equivalent hit a 15-year high. The CME's FedWatch Tool now predicts a 72% chance of a rate hike of 75 basis points in September, up from about 69% previously.

 

On the other hand, the Bank of England's (BOE) Decision Maker Panel survey of CFOs showed on Thursday that British companies' expectations for CPI inflation rose in August. Also, as reported by Reuters, a monthly survey by Citi and YouGov revealed on Wednesday that British people' expectations for average inflation over the next five to ten years skyrocketed to a record-high 4.8% in August, well over the Bank of England's inflation aim of 2%.

 

Expectations for August's Nonfarm Payrolls (NFP) and Unemployment Rate reports have dropped from 528K and 3.5%, respectively, to 300K and 3.5%, which is likely to cause worry in the markets. If the jobs report shows improved numbers, the possibility of future US dollar strength cannot be ruled out.

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