A bad week for Boris

It was a bad week for Boris last week, and because of that it was a good one for sterling, which strengthened to around $1.23 against the dollar and to under 90p against the euro. The single currency was a little firmer against the dollar, moving back above $1.10 having briefly dipped below this level at the start of last week. Bond yields in the core markets edged up as equities advanced for a second consecutive week, while Italian bond yields fell (to under 0.90% in the case of 10-year yields) on the back of political developments (the country has avoided fresh elections with a new government now in place)

Boris lost the vote on Article 50; lost the vote on a general election; lost his brother overboard; and lost his Pensions Secretary (who has resigned the Tory whip). He’s not down and out yet though, with media reports suggesting he is going to hang tough in terms of requesting an extension of Article 50, thus putting him on a potential collision course with the law, perhaps up to the Supreme Court. Meanwhile, he’s in Dublin today to meet with Leo Varadkar

Employment in the US rose by 130,000 in August, slightly shy of the 160k expected by the consensus, according to Friday’s ‘payrolls’ report. The unemployment remained close to at a multi-decade low at 3.7%, while the annual rate of growth in hourly earnings nudged down to 3.2%

Speaking last Friday, the Fed Chair Powell noted that “the (US) outlook…remains…favourable… with moderate growth, a strong labor market and inflation moving back up close to our 2% goal”. However, he added that “there are significant risks and we’ve been monitoring those, including slowing global growth, uncertainty around trade policy, and also persistently low inflation”, which would suggest the Fed is on course to cut interest rates again at its monetary policy meeting next week

The ECB meets this Thursday and is likely to announce a cut in the deposit rate (which currently stands at -0.40%) and a reactivation of its monthly bond purchases (QE), in response to slower growth, increased risks and persistently below target inflation

Data due this week include UK GDP (today) and labour market report (tomorrow) as well as CPI inflation (Thursday) and retail sales (Friday) in the US