Hello and welcome to our continued coverage of the global economy, financial markets, euro area and business.
Hopes of a rapid rebound from the Covid-19 pandemic have taken a hit this week, as cases continue to rise and the UK imposes new restrictions to fight the virus.
This drove the US dollar to its highest level in two months today, as fears about the economic outlook push investors towards safer assets. This brought the pound below $ 1.27 for the first time since late July.
After the stock markets suffered their worst drop since June Monday, there is an autumn chill in the markets (and outside, too).
Economists fear Britain’s recovery will weaken in the coming months, as pubs are forced to close early and millions of office workers continue to work from home.
Bank of America ‘chief economist, Robert Wood, predicts that growth will stagnate in the last quarter of 2020:
“We are struggling to see how the economy can grow in the fourth quarter with increasing foreclosure measures, softened stimulus measures and Brexit risks.”
Globally, Covid-19 cases are increasing faster than ever. Overnight, the World Health Organization reported that the weekly number of new infections recorded worldwide reached its highest level on record last week, at nearly two million.
Kyle Rodda of IG said the rally in the US dollar this week shows that the market appears to harbor greater doubt about the recovery of the global economy.
It seems to be a matter of degree rather than nature, but a few crucial variables alter the dominant discourse. First, new US budget support may not arrive until the US presidential election. Two: Europe’s economic recovery threatened by latest wave of COVID-19 infections and lockdowns
The notion of a broad-based recovery in global economic activity, which would crucially narrow the performance gap between the US economy and that of the rest of the world, has been questioned. Not that such a thing can’t or won’t happen, but instead its timeline may have been pushed back slightly.
This morning we find out how factories and service companies in the Eurozone and UK are doing this month. The latest PMI surveys are expected to show that private sector growth in the UK is slowing, as the summer surge in activity wanes.
The main U.S. central banker took a cautious note when he began this week’s testimony in Congress. Fed Chairman Jerome Powell warned that the outlook for the US economy remains “very uncertain” despite recent improvements.
A full recovery will likely only happen when people are confident that it is safe to re-engage in a wide range of activities.
- 9am BST: Eurozone flash composite PMI: expected to drop to 51.7 from 51.9
- 9:30 am BST: UK Flash Composite PMI: expected to drop to 56.3 from 59.1
- 2 p.m. BST: US house price index for July
- 2:45 p.m. BST: US flash composite PMI: expected to remain unchanged at 53.1
- 3 p.m. BST: Fed Chairman Jerome Powell testifies in Congress
- 3:30 p.m. BST: US Oil Weekly Inventory Figures