July 01, 2024

Market run-through

The electoral week kicked off yesterday when the French went to the polls in the first round of what, to an outsider, is a complex process. Le Pen’s party did well but now onto the next round with the only assured outcome being change for both France and Europe. The UK has its general election this Thursday, and saying it would be a shock if Labour didn’t win comfortably would be an understatement. The result is undoubtedly priced into sterling, and initially, at least, there shouldn’t be any immediate repercussions in the financial markets. With the election over, the Bank of England will be freed from its recent shackles and able to follow its wish to cut interest rates with a cut possibly as early as August, although the smart money remains on a drop in September.

After Friday’s figure, the PCE core deflator came in at 0.1%, as forecasted, and attention has turned to this week’s employment data in the US. As is usual in the first week of the month, there is a full docket of employment data, but the big one for markets is Friday’s Non-Farm Payroll, which is expected to have grown around 200,000, whilst the US employment rate is forecast to have held steady at 4.00%. With the US labour market still holding up, it is unlikely that the Fed will see the need to cut rates until after the election. After Thursday’s debate, President Trump’s chances of returning to the White House have improved, generally considered dollar-positive due to his penchant for a looser fiscal policy. It is worth noting that US markets are closed this  Thursday for Independence Day, which will also make Friday trading very thin. Finally, with the summer vacations here, we are also joining the charabanc and taking a few weeks off, returning refreshed!

Richard Matthews, Head of FX and Payment Partnerships

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