The coming storm

Today’s news headlines:

‘Investors brace for choppy markets as race for White House heats up’. The VIX measures perceived future volatility of the S&P 500 or the risk of large movements. Compared to elections of the past—which all included a volatility premium over the average year—this November's contest is expected to be the riskiest of all. Not only is expected price movement up, but in the period after the election, the level could remain high, which suggests that the vote is unlikely to be decisive. (Financial Times)

‘Sunak faces dilemma over tax to fill hole in UK Treasury’. Even though many criticised the government's support during Covid, there is no doubt that the measures undertaken were costly to the public purse. It's widely expected that Chancellor Sunak will be forced to reveal a ‘tax bombshell’ this autumn to help bridge the fiscal gap between tax and spending. While a number of measures are being considered—such as the equalisation of Capital gains with income tax—it seems that ultimately there will be no alternative than to resort to higher income or consumptions taxes. (Financial Times)

Today's events, rates, and data 

  • Yesterday the European Central Bank’s Executive Board member Philip Lane signalled concern over the level of EUR appreciation which is likely to remove some of the numerous long EUR positions built in over the past several weeks. Equities continue to rise in response to last week's Federal Reserve message (lower for longer). A good bit of yesterday's data also signalled some positivity, starting with China's PMI data and continuing through European and North American sessions. It's also worth noting that the large USD sell-off from yesterday was largely reversed overnight.  

Today's events

UK  BRC Shop Price Index: -1.6% vs -1.3% last month
AU  GDP q/q: -7.0% vs -0.3% last quarter
UK  Nationwide HPI m/m: 2.0% vs 1.8% last month
EU  German Retail Sales m/m: -0.9% vs -1.9% last month
UK  HPI y/y: 9:30AM
US  ADP Non-Farm Employment Change: 1:15PM
CA  Labour Productivity q/q: 1:30PM
UK  BOE Governor Andrew Bailey speaking: 2:00PM
UK  MPC member Ben Broadbent speaking: 3:30PM
US  Beige Book: 7:00PM

Interbank rates:

GBP/USD – 1.3330
GBP/EUR – 1.1230
EUR/USD – 1.1865
USD/CAD – 1.3070