Sterling on the back foot

The pound is on the back foot this morning as the new UK government ups the ante regarding a no deal Brexit – the media was full of this over the weekend – falling back to 90p against the euro and to around $1.2350 against the dollar, the latter the lowest level since late 2017. Meanwhile, the single currency closed out last week trading about a cent lower against the dollar from the previous Friday, at just over $1.11, after the ECB signalled it will ease policy – probably cutting interest rates and restarting QE – at its next meeting in September

Growth in the US economy moderated in the second quarter of the year, according to Friday’s preliminary GDP report, coming in at just over 2% after just over 3% in Q1, with very strong consumer spending countered by weak investment and exports

The Fed meets this week – Tuesday and Wednesday – and looks likely to cut its key interest rate by a quarter point (to a range of 2.0% to 2.25%). It will probably also signal it is prepared to cut further, if necessary, to “sustain the economic expansion”

The Bank of England announces its latest policy decision on Thursday and, in the face of on-going Brexit uncertainty, is likely to keep interest rates unchanged at 0.75%. Up to now, the BOE has been predicating its forecasts for growth and inflation on the basis of a “smooth transition” to a new UK-EU trading relationship. It is likely to do so again in its latest projections, but will also acknowledge that the risk of a ‘no deal’ Brexit has increased

Data due this week include GDP, inflation and unemployment in the Euro area (all on Wednesday), while manufacturing PMIs are due in the main economies (on Thursday)