All change… whether it’s the new UK Prime Minister, new Bank of England governor or new European Central Bank President the question will be: what can our new leaders do to steady the global economy as we continue into uncertain waters?
By Sarah Ryman
Boris Johnson has overseen one of the most brutal cabinet culls in UK political history within hours of arriving in Downing Street. Johnson commented that he would take personal responsibility for a range of improvements he wanted to see in the UK. “Never mind the backstop, the buck stops here,” he said on his arrival at Number 10.
The Bank of England’s (BoE) outgoing governor Mark Carney speaking in Bournemouth this month said financial markets had recently experienced a “profound transformation” driven by growing concerns over the impact of rising trade tensions and policy uncertainty. He added that a global trade war and no-deal Brexit are not yet certainties: “whether current trade tensions shipwreck the global economy or prove to be a tempest in a teacup will have an important influence on the forecast for growth and inflation in the UK.”
Carney’s comments warning about slowing growth along with Brexit fears, downbeat economic news and solid US jobs numbers caused sterling to fall against the US dollar.
There was a glimmer of hope with GDP figures released this month up 0.3% in May compared to negative 0.4% the previous month although consumer spending remained at its weakest level since records began in 1996.
Figures out this month showed that UK inflation has remained at the BoE target of 2% for the second month in a row. The Consumer Price Index figure hitting this target is the ideal level for ensuring smooth growth in the economy according to the central bank.
Christine Lagarde (current IMF chair) was successful in the race to become the new ECB President. There is a general consensus that she will maintain a similar stance to Draghi (the current head of the ECB) of doing ‘whatever it takes’ to fight low inflation. Christine takes over the role in November. Eurozone manufacturing hit a three-month low for July according to data released this month.
US President Donald Trump and his Chinese counterpart Xi Jinping agreed a trade war truce this month announcing that the world’s two largest economies would reopen trade talks although little progress seems to have been made since.
Non-Farm Payrolls data surpassed expectations with 224,000 jobs created in June against a forecast of only 160,000. This is likely to take some of the pressure off of the Fed to cut interest rates aggressively yet the probability of a cut is at 100% for the end of July with economic data releases pointing to a weakening economy. Powell, the US Fed Chairman, stated that weak inflation could be more persistent than previously thought, currently running at 1.60% and reiterated that the Fed would act appropriately therefore reaffirming that a cut at the end of this month is likely.
Any statements, data, and information in the Market Commentary which appears to be factual in nature are based on sources, including published sources, which Bank Leumi UK believes to be reliable but has not independently verified. Bank Leumi (UK) plc does not make any guarantee, representation, or warranty as to the accuracy or completeness of such statements. This material is based on public information as of the specified date, and may be stale thereafter. We have no obligation to tell you when information herein may change. Consequently Bank Leumi (UK) plc is not responsible for its contents nor any losses, expenditure or damages which may be incurred as a result of relying on such contents. We reiterate that no representation, warranty or undertaking, express or implied is given to the accuracy or completeness of the information contained in the Market Commentary, and Bank Leumi (UK) plc does not accept any liability for losses which might arise from any use of the information.
Bank Leumi (UK) plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority