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Pound falls as UK EU tensions rise

Pound falls as UK EU tensions rise 150 150 Realm

Investors are focusing on the deteriorating relationship between the UK and EU. Boris Johnson’s government has said it will push ahead with its plan to rewrite the withdrawal agreement despite this being in violation of international law. The Pound has fallen hard this week with the EU threatening legal action as tensions rise. 

 

Global Macro

  • US crude oil stocks increased by 2.032 million barrels in the week ended September 4th 2020, the first rise in seven weeks and compared to market expectations of a 1.887 million drop, according to the EIA Petroleum Status Report. Meantime, gasoline inventories were down by 2.954 million barrels, while markets had forecast a smaller 2.384 million decline.
  • Wholesale inventories in the US fell 0.3 percent month-over-month in July of 2020, more than an initial estimate of a 0.1 percent drop, and following a 1.3 percent decline in June. Stocks fell for durabe goods (-0.9 percent), namely professional equipment (-2.7 percent) and autos (-0.6 percent), but rose for nondurables (0.6 percent), mainly drugs (3.1 percent) and groceries (0.5 percent). Year-on-year, wholesale inventories fell 5.6 percent.
  • Producer prices for final demand in the US increased 0.3 percent from a month earlier in August 2020, following a 0.6 percent rise in July and above market expectations of a 0.2 percent gain. Cost of goods advanced 0.1 percent, after increasing 0.8 percent in the prior month, led by plastic resins and materials. Prices of services went up 0.5 percent, the same pace as in July. Year-on-year, producer prices dropped 0.2 percent, after falling 0.4 percent in the prior month and compared to forecasts of a 0.3 percent decline. The core index which excludes food and energy went up 0.4 percent month-over-month, easing from a 0.5 percent rise in July. The annual rate increased 0.6 percent, following a 0.3 percent gain in the previous month.
  • The number of Americans filling for unemployment benefits was unchanged at 884K in the week ended September 5th, the same as an upwardly revised 884K in the previous week and above market forecasts of 846 thousand. It is the first time since March that claims stay below 1 million for two straight weeks although the number still remains elevated. The 4-week moving average was 970,750, a decrease of 21,750 from the previous week. Based on non-seasonally adjusted data, biggest increases in claims were seen in California (17.95K), Texas (9.65K) and Puerto Rico (9.4K) while main decreases were seen in Florida (-9K), Kentucky (-7.5K) and Michigan (-5.6K). Meanwhile, continuing claims went up to 13.38 million from 13.29 million, above forecasts of 12.925 million.
  • Car sales in China increased 11.6 percent year-on-year to 2.19 million in August 2020, the fifth straight month of increase, as the vehicle market comes off lows hit during the coronavirus lockdown. Sales of trucks, vans and other commercial vehicles, which account for around a quarter of overall market, surged 41.6 percent while sales of passenger vehicles were up 6 percent. Meanwhile, sales of new energy vehicles (NEVs), which include battery-powered electric, plug-in hybrid and hydrogen fuel-cell vehicles jumped 25.8 percent to 109,000, the second straight month of increase. Considering January to August, sales decreased 9.7 percent to 14.55 million vehicles. For 2020, China’s vehicle sales are expected to drop around 11 percent from a year earlier to 1.1 million.
  • On Thursday: European stocks ended mostly lower after a somewhat volatile session. Investors were reacting to the European Central Bank’s monetary policy announcement and tracking news on Brexit and coronavirus updates, besides digesting the latest batch of economic data from the zone. The ECB left its key interest rates and the size of asset purchases unchanged, as expected, and reiterated that it stands ready to make adjustments to its tools when needed. US stocks extended previous session’s significant rebound early, but pulled back sharply over the course of the session. With the downturn, major averages largely offset the strong gains posted in the previous session. Strength among tech stocks contributed to the early advance on Wall Street, but they also helped to lead the subsequent pullback by the markets. 

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