That FT story about divisions at the European Central Bank over QE just lifted the euro to a two-week high.
Sterling just slipped to a one-month low against the euro.
It touched €1.1105 for the first time since early September, meaning it has lost 2.3% against the euro in the last three weeks.
Much of those losses have been driven by worries about a no-deal Brexit. Today, though, is more about the euro itself. It’s rallying, after the Financial Times reported that the European Central Bank ignored advice from its own officials not to relaunch its stimulus programme last week.
These divisions could make it harder for the ECB to loosen monetary policy even further.
Germany’s economy is also struggling, compounding the risks to the UK economy.
New data show that German exports slumped by 3.9% year-on-year in August, the worst performance this year, with imports falling by 3.1%.
This increases the risk that Europe’s largest economy has fallen into recession this autumn, buffeted by the US-China trade war. Germany, like the UK, suffered a small contraction in April-June.
Based on provisional data, the Federal Statistical Office (Destatis) also reports that German #exports decreased by 3.9% and #imports by 3.1% in August 2019 year on year. https://t.co/WCyTEEbiGE pic.twitter.com/Cd8YXqszRa
— Destatis news (@destatis_news) October 10, 2019
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Two of the City’s big fears – a Brexit-induced recession and a full-blown trade war – are in the spotlight today.
The latest UK GDP report, due at 9.30am, is expected to show that growth fizzled out in August. Economists predict GDP was unchanged during the month, after rising 0.3% in July.
And over the last three months, GDP is expected to have only risen by 0.1% — much slower than usual.
Given the economy actually shrank in April-June, there’s clearly a risk that Britain’s economy stagnates. It could even slide into a full-blown recession later this year as Brexit uncertainty continues to hit business investment.
The economy may have got one Brexit boost — car factories stayed open in August, having brought their usual summer shutdown forwards to April. That should have boosted manufacturing output during the month.
But with the eurozone also looking weak, and global trade slowing, there’s not much optimism about today’s August GDP report.
Here’s what the City’s expecting:
- Monthly GDP: unchanged in August compared with July
- Growth in June-August: Up just 0.1% compared with March-May.
- Manufacturing production: Down 0.4% compared with September 2018, but up 0.2% month-on-month
- Services output: flat in August.
We’ll also get UK trade data, expected to show Britain’s goods deficit with the rest of the world widened in August.
But the big trade story is happening in Washington today, where a Chinese delegation led by vice-premier Liu He will meet US counterparts later today.
Hopes of a breakthrough in the ongoing trade war aren’t high, as the US has just blacklisted 28 Chinese companies over human rights abuses against Muslim groups in Xinjiang province.
China has briefed that Liu He will offer to buy more US agricultural goods in an attempt to break the deadlock, but they’ve also hinted that the two-day talks could end early.
- 9.30am BST: UK monthly GDP report for August – expected to show GDP was flat month-on-month
- 9.30am BST: UK visible trade balance for August – expected to show a deficit of £10bn, up from £9.1bn in July
- 1.30pm BST: US consumer price inflation for September – expected to show prices rose 0.1% in the month
- 3pm BST: IMF to publish its latest Global Financial Stability Report
- 3.30pm BST: IMF to publish its latest Fiscal Monitor