Asset Summary – Thursday, 2 October
GBPUSD is exhibiting upward pressure, primarily driven by a weakening US dollar amid concerns surrounding a potential US government shutdown. The Bank of England’s recent decision to hold interest rates steady, coupled with market expectations of no rate cuts until 2026, further supports the pound’s value. However, the mixed signals from BoE officials regarding inflation and the appropriate level of interest rates introduce some uncertainty. Investors are also monitoring potential tax policy changes from Chancellor Reeves, as these could impact the UK’s fiscal outlook and ultimately affect the pound. This combination of factors suggests a complex trading environment where dollar weakness and BoE policy are counterbalanced by domestic fiscal concerns and divergent opinions among policymakers.
EURUSD is likely to experience upward pressure. Eurozone inflation data exceeding expectations strengthens the euro, particularly against a backdrop of a weakening US dollar due to disappointing employment figures and a government shutdown. The increased inflation makes it less likely the European Central Bank will cut interest rates in the near term, as suggested by recent statements from ECB officials. This hawkish sentiment regarding interest rates, combined with a weaker dollar, supports a potential rise in the EURUSD exchange rate.
DOW JONES saw a slight gain in the previous session and futures trading indicates a continuation of this stability. The market appears resilient, seemingly unaffected by both the government shutdown and weaker-than-expected private payroll data. Positive sentiment around pharmaceutical stocks, spurred by policy developments, might further contribute to upward pressure, although the absence of the September nonfarm payrolls report due to the shutdown introduces an element of uncertainty.
FTSE 100 experienced a significant surge, reaching a new high, primarily fueled by a substantial rally in pharmaceutical stocks. The agreement between Pfizer and the Trump administration regarding drug pricing provided a boost to the sector, sparking optimism for other pharmaceutical companies. Additionally, positive performance from JD Sports, influenced by Nike’s better-than-expected sales figures, contributed to the index’s gains. Steady UK house prices, indicating a potential strengthening in the market, further supported the positive sentiment. In the US, economic factors such as a weak ADP report and the ongoing government shutdown are influencing investor expectations regarding future Federal Reserve policy.
GOLD is exhibiting resilience near record highs, buoyed by anticipation of Federal Reserve rate reductions and its traditional role as a safe store of value. A weaker-than-expected report on private-sector employment supports the view that the Federal Reserve might maintain or even accelerate its interest rate cuts, diminishing the opportunity cost of holding gold. Furthermore, uncertainty surrounding the delayed nonfarm payrolls report and the ongoing government shutdown are driving investors toward gold as a hedge against potential economic instability. A Supreme Court ruling potentially diminishing the perception of political influence on the Fed could provide some offset to the factors currently supporting higher gold prices.