Important Note from the D-Zero team - Amended Trading Hours
Just a heads up to keep note in your calendars for Monday the 2nd September as trading hours may be amended due to US Labor Day. To read more, check out our blog here.
Weekly High Impact News Preview: September 2 - September 6
Before we take a look at the weekly breakdown of macro indicators, let's dive into one of the biggest stories of this week. The "painful" insight into the UK's October Budget.
UK Prime Minister's Upcoming October Budget Expected to Be 'Painful'
In his recent address from Downing Street, UK Prime Minister Keir Starmer prepared the nation for what he described as a "painful" budget announcement set for October. Amidst the backdrop of the lush Downing Street garden, a stark contrast to the contentious gatherings held under his predecessor, Boris Johnson, Starmer's tone was decidedly sober as he braced the country for challenging economic decisions ahead.
The Labour government has uncovered a daunting £22bn shortfall in the public finances, a revelation that has significantly shifted the administration’s fiscal strategy away from previously held stances against raising taxes. Despite a campaign promise to avoid hikes in income tax, national insurance, or VAT, the dire state of the economy has forced a rethink. The Prime Minister emphasized that the burden of upcoming fiscal measures would fall on those "with the broadest shoulders," indicating potential crackdowns on tax benefits for non-domiciled residents in the UK.
The discovery of the financial "black hole," which was not accounted for in the Office for Budget Responsibility's (OBR) forecasts due to alleged concealment by the previous government, has left the current administration scrambling to find solutions. This includes potentially increasing capital gains tax and inheritance tax, as well as implementing austerity measures such as ending winter fuel payments for millions of pensioners—a decision that has sparked unrest within the Labour Party itself.
Chancellor Rachel Reeves is contemplating various revenue-raising measures and stricter budgetary controls in what will be her first significant fiscal event. These decisions are crucial as they also involve reevaluating how debt is accounted for, excluding certain Bank of England figures.
While Starmer acknowledged the necessity of these tough choices, he attributed the dire fiscal landscape to the preceding government's "14 years of rot" and mismanagement, particularly highlighting recent crises in prison capacities which he had to address personally during riot control efforts.
This forthcoming budget represents not just a financial recalibration but a significant political test for Starmer and his government as they navigate the fallout of austerity measures against a backdrop of economic necessity. The Prime Minister's approach aims to reset the UK's fiscal path while managing the political repercussions of the decisions made under the shadow of a challenging inheritance.
Monday, September 2:
China: The Caixin Manufacturing PMI for August is set to be released, an important indicator of the economic health of the manufacturing sector. A previous reading under 50 suggests contraction.
Tuesday, September 3:
Switzerland: Watch out for the Consumer Price Index for August year-on-year and the Q2 Gross Domestic Product quarter-on-quarter, providing insights into inflation trends and economic growth.
USA: The ISM Manufacturing PMI for August will be closely monitored, especially given the previous month's contraction territory reading.
Wednesday, September 4:
Australia: GDP for Q2 will offer a glimpse into the economic growth down under following a modest previous quarter.
China: The Caixin Services PMI for August will help gauge the health of the service sector, crucial for understanding the broader economic landscape.
Canada: The Bank of Canada will announce its latest interest rate decision, followed by a detailed monetary policy statement.
Thursday, September 5:
Australia: Trade Balance data for July and a speech by RBA Governor Bullock are on the radar, likely impacting the AUD and its pairs.
Eurozone: July Retail Sales year-on-year will be significant for insights into consumer spending amidst economic uncertainty.
USA: The ADP Employment Change for August will be observed as a precursor to the Nonfarm Payrolls, providing early clues about the labor market’s strength.
Friday, September 6:
Eurozone: Q2 GDP figures are due, offering a clearer picture of the economic activity across the euro area.
Canada: Employment data including the Net Change in Employment and the Unemployment Rate for August will be key for CAD traders.
USA: A packed day with the release of Nonfarm Payrolls, along with Average Hourly Earnings for August, crucial data points that could sway Federal Reserve rate decision expectations and broadly impact USD markets.
This week’s lineup suggests a heavy tilt towards manufacturing and employment data, key drivers for central bank policies and market sentiment. Prepare your strategies and stay tuned for these developments that could offer significant trading opportunities!