Return to Insights

Weekend Summary

Conservative party conference, UK water companies propose infrastructure improvements, the US avoids another government shut down, and closing markets last Friday.

The Conservative party conference got underway yesterday with a few key takeaways and big hint at when the next general election will be: Before the event even got started, Rishi Sunak announced £1.1bn is to be split and spent on 55 overlooked towns in the UK, with the hope of reinvigorating them. As part of the measures the towns will set up ‘town boards’ comprised of community leaders, local authorities and local employers to decide how best they go about deploying the cash – with support given directly from central Government in the form of a ‘Towns Taskforce’ that will sit within Michael Gove’s levelling up department.  Local councillors shouldn’t get too excited though ,as the funds will be paid over a ten-year period, but perhaps with the help of some planning reform and other incentives there might be some private sector money that also makes its way in alongside the government’s.

Also in the conference; there’s some tension between those that want a tax cut and the men in a position to sign them off. Both Rishi Sunak and Jeremy hunt are resolutely against lowering taxes ahead of the next election, which goes against many in the party who are looking at the likely shelving of most of HS2 as a great opportunity to offer something to taxpayers. Michael Gove spoke out against the party line of needing to remain steadfast and said that he would like to see the tax burden reduced before the next election.  Rishi Sunak is still of the opinion that “the best tax cut that we can give working people is to halve inflation” – and mathematically he’s correct.

On the note of inflation and general elections, Jeremy Hunt has apparently been caught in a secret recording of a private meeting between Tory activists saying that a general election will be called when inflation has fallen below three percent – which based on the most recent Bank of England forecasts would put it around autumn next year.

Away from the conference (but no doubt returning to it as the week goes on) UK water companies are proposing to spend £96bn on improving infrastructure over five years, from 2025, but this will come at a cost of £84 a year on top of the current average water bill. The planned investment is almost double that being invested in the current five year investment period and will create new reservoirs, desalination plants and also infrastructure linking the wetter north with the drier south (perhaps they could run it down the proposed HS2 line?) as well as tackle sewage discharge and leaky infrastructure. The Times has the story, click here to read…

Elsewhere

Italy are planning an asset sale to keep their debt levels in check: The plan would see the country raise around €20bn over two years (approximately 1% of GDP) by selling down stakes they have in companies like bank Monte dei Pashi di Siena, which the government bailed out in 2017. The government also released debt forecasts for the next couple of years which include these sales and they show debt would reduce marginally from 140.2% as it stands today, to 139.6% by 2026 – without the sales (or some budgetary alteration) debt to GDP would move in the other direction, so this is something the current government are keen to try and get moving.

Staying in Europe

Slovakia went to the voting booths over the weekend and the winner, taking 24% of the vote, is the Smer-SSD party – a populist and pro-Moscow party that is led by a former Prime Minister. The win wasn’t by enough to form a majority government, so there will be talks of a coalition but with seven parties in parliament that sit on a wide arc of the political spectrum, it could be some time before a functioning government is formed. The news is being welcomed in Moscow, where they see that there may be a glimpse of an EU/NATO crack appearing. The BBC has more, click here to read…

Across the Pond

The US has avoided another government shutdown with a last minute deal being signed that now kicks the can down the road until mid-November. They managed to get the deal across by both sides giving up the key components that they were so passionate about – Democrats funding for Ukraine and Republicans border security money. Given the short duration to the funding gap and the fact that plenty of people on both sides of the aisle waled away without getting what they had hoped for, we’d expect this to be a contentious ‘round two’ in a few weeks’ time.

Markets closed a tough quarter on Friday, with US stock markets closing the quarter lower than they started, but still marginally up on the year to date. Most of the bad news came in September, with news that inflation was still looking sticky, which meant that interest rates are set to be higher for longer. Energy stocks were a different story and have largely done well as the cost of oil rose over the month – this has a benefit to the FTSE100 where a lot of global oil and gas companies have listings.

Looking at the week ahead: as the first week of the month, it’s always packed with data – starting today with PMI manufacturing data from just about everywhere. The numbers are universally expected to be in contractionary territory, but the question will be by how much.

Overnight we’ll see the Australian central Bank speak rates, but are likely to stay on hold. Wednesday is the PMI services day, always a big one for the UK where services make up nearly 80% of our economic output. Thursday we catch our breath and then Friday is the US non-farm payrolls. Throughout all of this, China is on their Golden Week holiday and Japan just might intervene on the FX market as their currency is uncomfortably weak against the almighty dollar.

Have a great week.

Ready to talk FX?

Get in touch with one of our friendly and knowledgeable experts to see how FX strategy can drive commercial impact in your business.

Contact us

Related
Commentary

Find out how we have helped our clients meet their hedging requirements.

UK Inflation Eases to BoE Target, But Challenges Remain

Word of the week Wednesday, UK inflation falls to BoE's 2021 target, May 2024 reported as warmest May on record, and lower-than-expected US retail sales.

RBA Hold Rates for a Fifth Consecutive Time

Travel Tuesday, benchmark rate remains unchanged by RBA, rising wage growth across the continent, rising oil prices, and Farage announces Reform 'contract'.

French Election Special

Macro Monday, first official day of campaigning in France, RN party's fiscal plans leaves markets considering implications, political and economic uncertainty leaves French stocks under pressure, and what's happening this week.

Labour Release Manifesto

Friday feeling, yesterday's release of the Labour party manifesto, introduction of National Wealth Fund under a Labour government, and additional funding for Ukraine from G7.

Fed Issue Forward Guidance as Policy Makers Hold Rates

Thought for Thursday, benchmark policy target rate maintained by the Fed, signs of more easing than expected for US inflation, and today's events.

Conservatives Reveal Manifesto Ahead of Labour’s Launch Today

Word of the week Wednesday, manifesto from the Conservative party released yesterday at Silverstone, Labour party manifesto set to release today after making criticisms, data shows sharp decline

In Focus: America’s TCJA

Travel Tuesday, focus turns to the Tax Cuts and Jobs Act as the US election draws closer, UK unemployment data, and wage growth comes in marginally higher than expectations in the UK.

European Parliamentary Elections

Macro Monday, fallout from provisional European Parliamentary election results dominate headlines, French President calls for snap election, and what's happening today.

Ready to talk FX?
Get in touch today to see how FX strategy can drive commercial impact for your business.
Contact us