Asset Summary – Tuesday, 2 September
GBPUSD is likely to experience continued upward pressure, driven by a confluence of factors. A weaker dollar, influenced by concerns regarding the Federal Reserve’s independence and ongoing trade disputes, provides a tailwind for the pair. Domestically, in the UK, attention will be focused on the upcoming Autumn Budget and any signals from the Bank of England regarding future monetary policy, potentially impacting the pound’s value depending on the tone and indications of future actions. Investors should monitor these events for potential volatility and directional cues.
EURUSD is exhibiting bullish momentum, driven by dollar weakness and supported by potential easing of trade tensions between the US and Europe. The euro’s recent gains are fueled by uncertainty surrounding the Federal Reserve’s monetary policy and concerns about its independence, making the upcoming US labor market data particularly important for determining future direction. The European Commission’s proposal to eliminate tariffs on US industrial goods further strengthens the euro’s position by potentially leading to reduced US tariffs on European cars. However, political instability in France could introduce some volatility and temper the euro’s upward trajectory.
DOW JONES faces a potentially challenging period as trading resumes after the holiday. Historical trends suggest September is often a weak month for equities, which could pressure the Dow. Furthermore, uncertainty stemming from a recent court ruling against Trump’s tariffs and ongoing concerns about the Federal Reserve’s independence, specifically regarding potential changes in its leadership, may weigh on investor sentiment. While the Dow experienced gains in August, these positive trends could be overshadowed by the confluence of these factors, potentially leading to volatility or a downward correction.
FTSE 100 experienced a mixed trading day, ultimately closing with minimal gains. The upward pressure came primarily from positive performance in defense and precious metals stocks, boosted by factors such as a significant warship export deal for the UK and rising gold and silver prices. Simultaneously, the index faced headwinds from underperforming utility stocks and a continued contraction in the UK’s manufacturing sector, as indicated by PMI data. Investor sentiment appears cautious, pending key economic data releases from the U.S., which could further influence the index’s direction. Healthy credit flows and rising mortgage approvals domestically offered a somewhat offsetting positive signal.
GOLD is experiencing significant upward pressure, driven by a confluence of factors. The anticipation of a near-certain interest rate cut by the Federal Reserve is weakening the US dollar, making gold more attractive. This expectation stems from recent US inflation data. The upcoming nonfarm payrolls report will likely further shape expectations about the magnitude of the rate cut. Furthermore, concerns about the Fed’s independence, fueled by the disputed legality of a governor’s dismissal, and uncertainty regarding tariffs, despite a court ruling against their legality, are bolstering gold’s safe-haven appeal, collectively pushing prices to record levels.