ACM Update 29-09-25
Despite concerns from the OECD that the global economy is yet to feel the full impact of Trump’s tariffs, the US economy for now remains resilient. The final GDP figure for Q2 was upwardly revised to 3.8% last week, well above the initial estimate. Fed Chair Powell though stated that a slowing jobs market is causing concern.
UK news was centred around a speech from the Bank of England Governor, Andrew Bailey, as well as further economic commentary from the OECD.
As Q3 comes to an end this week, the latest round of US jobs data will be released. Friday’s Non-Farm Payrolls release is projected to show a low number again for the September figures. All this whilst the US Government Shutdown looms large early in the week.
After a week of major central bank interest rate decisions, last week was more about economic data and speeches from policymakers. Geopolitics also came to the fore as a result of speeches at the UN General Assembly in New York.
As mentioned already, the US economy bounced back in Q2 following a dire Q1 amidst tariff uncertainty. But the rebound was even greater than expected previously, as the final reading was published last week. A 3.3% rise turned into a 3.8% confirmed figure, where spending with the US recovered as international trade became clearer.
But the future doesn’t look as rosy if you ask the OECD (Organisation for Economic Co-operation and Development). The body continues to produce warnings that the global economic outlook is weakening, as policy uncertainty weighs on demand. The first half of this year was better than forecast, but they expect tariffs to make a global impact in 2026.
For now, US data seems to have recovered slightly. The weekly Unemployment Claims figure which caused nervousness a few weeks back after a surge, cooled back to the lowest figure since mid-July, last week. Durable Goods Orders which fell considerably earlier in the year due to trade uncertainty, moved positively in August. This is their eighth straight month ahead of expectations.
The Federal Reserve’s preferred inflation index of Core PCE inflation, also held steady in August. Manufacturing and Services PMI figures came in on forecast for September.
A variety of Fed policymakers also held speeches last week. Chairman Powell spoke of his concerns for the US jobs market, with the recent slowdown leading the Fed to cut rates the week prior. Trump-appointee Stephen Miran, however suggested the Fed have a lot of catching up to do on rate cuts. He believes that high interest rates are strangling the economy, not White House policy.
Other members suggested a lack of confidence in inflation forecasts (Thomas Barkin), caution in reducing interest rates too much (Beth Hammack) & little reason to cut rates further for now (Raphael Bostic).
The buoyant growth figure was enough to drive the Dollar throughout most of the week. The currency strengthened by circa 2% at one point for the week vs a lacklustre Pound, before reversing slightly on Friday. Movements on the pair last week can be seen below:
As with the US, the UK was following on from an interest rate decision the previous week. With the Bank of England holding firm at 4%, Andrew Bailey’s comments during a speech and an interview during the week provided clues towards ongoing policy.
The Governor stated that there is still further movement down to come for interest rates. He noted though that “exactly when that will be and how much it will be, will depend on the path of inflation going down”. He believes caution from consumers as a result of April’s tax hikes, has spread through the economy, resulting in a slight slowdown.
His MPC colleague Megan Greene used a speech of her own to talk about UK inflation, suggesting it is stronger than the Bank has previously forecast. As a result, she thinks a cautious approach to further rate cuts is required. Greene was on the losing side of the 5-4 decision to cut interest rates back in August, when she voted for a hold.
These inflationary concerns were also echoed by the OECD’s report. They stated that the UK is due to have the highest rate of inflation of the G7 economies this year. Food costs remain the biggest driver of price rises, whilst the body expect an average of 3.5% UK inflation in 2025.
The OECD growth forecast for the UK in 2026 remains at 1%, as with their June publication. Chancellor Reeves clearly only read the bits she wanted to, as her response stated the figures “confirm the British economy is stronger than forecast” and “the fastest growing of any G7 economy in the first half of the year”.
On the continent, geopolitics were a driver once more after reports of Russian planes entering Estonian airspace. This led to some nervousness around the single currency, which lost ground, especially against the safe haven US Dollar.
Eurozone data continues to be slightly under expectations on the manufacturing side, where tariffs still weigh heavily. The services sector meanwhile recorded above forecast numbers again for September.
There was one speech from an ECB policymaker last week, which came from Joachim Nagel. Given the ECB’s position of on target inflation at 2%, Nagel stated that any further rate cuts at the moment would risk an imbalance in that metric. The Bundesbank President also believes the German project to rebuild infrastructure and defence, is being positively felt across European economies.
Following on from other recent changes, the Spanish economy received another two upgrades from major credit rating agencies. S&P Global upgraded the country earlier on in the month, whilst Moody’s and Fitch made changes at the end of the week. Both cited similar reasoning, namely balanced economic growth, improvements in the jobs market, low energy prices and a stronger banking sector.
Sterling-Euro was little moved during the week, as shown below:
The week ahead:
Monday – Spanish CPI inflation (08:00), UK Mortgage Approvals (09:30), ECB Nagel speech (10:00), BoE Ramsden speech (13:00), Fed Bostic speech (23:00)
Tuesday – CANADA BANK HOLIDAY, Reserve Bank of Australia rate announcement (05:30), UK Final GDP (07:00), BoE Lombardelli speech (12:50), US JOLTS Job Openings & Consumer Confidence (15:00), BoE Breeden speech (16:30)
Wednesday – EU/UK/US Manufacturing PMIs (08:15-15:00), EU CPI inflation (10:00), BoE Mann speech (10:55), US ADP Non-Farm Employment (13:15)
Thursday – US Weekly Unemployment Claims (13:30)
Friday – EU/UK/US Services PMIs (08:15-15:00), ECB Lagarde speech (10:40), US Non-Farm Payrolls & Unemployment (13:30), BoE Bailey speech (14:20)
The last few days of September will provide plenty to talk about from a UK perspective, with the Labour Party Conference taking place. The Liverpool event runs from Sunday to Wednesday and will see speeches from all the usual names.
There are several speeches from Bank of England policymakers scattered throughout the week too. These include Dave Ramsden, Clare Lombardelli, Sarah Breeden and Catherine Mann. The Bank’s Governor, Andrew Bailey, speaks at an event in Amsterdam on Friday afternoon. Narrative from any of these with regards to future policy decisions could well be important. The final confirmation of UK economic growth (GDP) in Q2, is expected to show a small 0.3% expansion.
In the US, as always it is a big week of releases around the start of the month. Tuesday to Friday contain the usual monthly jobs releases, those which created enough nervousness for the Federal Reserve to cut interest rates ten days ago. Friday’s Non-Farm Payrolls release is the big one, where in August the US economy added just 22,000 jobs. Current projections suggest another low figure of around 50,000 for September.
The US Government shutdown looms large once again for the Dollar. With Congress required to avoid such a situation, Donald Trump is already threatening mass firings if no deal is reached. Barring this taking place before midnight on Tuesday US time, we could well see considerable Dollar weakness. The previous Government shutdown took place in Trump’s first presidency.
Eurozone news is quieter, with a scattering of releases in the week. These include the usual Services and Manufacturing performance figures. A Christine Lagarde speech on Friday morning is likely the standout, perhaps offering clues as to ECB activity to come.
As always, plenty to come this week, especially the latter part. For any pending requirements, make sure to reach out to the Aston team for assistance.
Have a great week.
