Good morning,

USD: Dollar ignores politics and growth

The dollar strengthened momentarily on Friday following the best quarterly growth numbers since 2014.The 4.1% overall expansion number was a little below expectations however some of the separate component parts were fantastic; real final sales blowout to 5.1% growth whilst household spending at 4% will have also helped.

There are a few things that we must think about however,

a) Obviously this number is going to be revised and could easily be revised as much higher as it is lower.

b) The strong number will keep expectations of a further two rate hikes this year and at least another hike in Q1 from the Federal Reserve in place.

c) With now only 99 days until the US goes back to the polls at the Midterm elections, with everything that is swirling around the Trump administration these numbers set up a ‘Strong Trump, Strong Economy’ campaign for Republicans.

Overnight, Trump threatened to shut down the federal government if Congress does not pass sweeping changes to immigration laws, including giving more public money to build his long-promised border wall. On social media Trump said that he “would be willing to ‘shut down’ government if the Democrats do not give us the votes for Border Security, which includes the Wall! Must get rid of Lottery, Catch & Release etc. and finally go to system of Immigration based on MERIT! We need great people coming into our Country!”

The deadline for additional government funding is September 30th.

GBP: Holding its breath for Thursday’s Bank of England meeting

Brexit headlines over the weekend have veered from the news that the Army will be called in to help deliver food and fuel in the event of a no-deal Brexit to the new Italian PM telling Theresa May that he will be happy to back her on trade. Neither of these sound particularly factual or of little consequence; the former is not the Army’s job and Italy doesn’t negotiate its own trade deals, the EU does.

Sterling’s hasn’t reacted to either of these particular stories; we’ve got the Bank of England to worry about on Thursday. Traders are assigning a 90% chance that borrowing costs will increase at noon on Thursday.

CNH: Sentiment is important

While there is a Bank of Japan and a Bank of England policy decision this week, the most important piece of data through the course of this week may be tonight’s run of Chinese PMI numbers which will be some of the first data pieces that could take in manufacturer and exporter fears over the trade tariffs.

Both manufacturing and non-manufacturing PMIs will be released tonight, with the Caixin version – a release that has a greater focus on smaller businesses – released Tuesday night. USDCNH topped out at 6.85 on Friday and remains close to that level this morning.

Have a great day.