Sterling has strengthened against the US dollar on the interbank market this week. As with the euro, this is in part because a ‘No Deal’ Brexit looks less likely, and because of the UK’s consistent economic outperformance.
However, it’s also because of America’s growing economic weakness, including regarding the closely-watched US Non-Farm Payroll (NFP), and US inflation.
According to the US Department of Labour’s monthly NFP last Friday 6th September, the United States created just 130,000 new jobs in August. This was below economists’ forecasts for 158,000 new roles, as well as July’s figure of 150,000. It’s also below the USA’s average monthly job creation in 2018, of 223,000 new positions. This adds to growing data that America’s economy is slowing, such as recent statistics from IHS Markit that US manufacturing is near stagnation, plus falling inflation, which dropped by -0.1% in August to 1.7%.
That said, on the bright side for the United States’ economic outlook, recently the USA and China agreed to arrange a fresh round of trade talks, to try and resolve their trade war. In recent months, Washington and Beijing have imposed tariffs worth hundreds of billions of dollars on each other, and there’s growing evidence that it’s hurting their economies.
What with the USA creating fewer jobs, and fears that the US economy is slowing, America’s central bank, the Federal Reserve (Fed), is being tipped to cut interest rates next week. If so, this would be the Fed’s second cut this year, down to 1.75%-2.00%. This would be to cut borrowing costs in the USA, and stimulate business activity, yet simultaneously signals that America’s economy needs greater support to prosper. The Fed meets next Tuesday 17th and Wednesday 18th September.
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