Good morning,
In the era of family WhatsApp groups, it seems Queen Camilla is sticking to her classic Nokia brick phone, leaving her out of the Windsor family chat. While critics say the monarchy is out of touch, Camilla’s low-tech choice apparently isn’t just a quirk—her son, Tom Parker-Bowles, notes it’s partly a security measure. For Tom, who often sees his mother more on the news than in person, a missed call from Jersey is just a day in royal family life.
Last Week
Last week saw a boost for Sterling, with BoE Governor Andrew Bailey offering a cautious stance on rate cuts, tempering earlier hints at rapid easing. Sterling’s resilience, however, is set against a backdrop of mixed data: PMI readings indicate a slowdown, and consumer confidence is at its lowest this year as anticipation mounts for next week’s Budget. Chancellor Rachel Reeves aims to revamp the fiscal landscape, reportedly permitting more borrowing, which could stoke bond yields and support Sterling further. Additionally, Labour’s proposed workplace reforms are projected to cost UK businesses £5bn annually, placing extra pressures on sectors already stretched by rising costs. Meanwhile, economic growth prospects got a lift from the IMF’s revised forecast, positioning the UK as one of the fastest-growing advanced economies.
With two weeks until the US election, financial markets are pricing in a Trump advantage, as new polling shows him pulling even or ahead in critical swing states. A Washington Post-Schar School survey places Trump neck and neck with Harris across battlegrounds such as Arizona, Michigan, and Pennsylvania. Despite Harris’s record-breaking $1bn fundraising haul, Trump is gaining ground financially, with Elon Musk’s high-profile backing adding to his momentum. This political uncertainty, coupled with heightened geopolitical risks, sent gold surging to a historic high of $2,740.37 per troy ounce, reinforcing its status as a haven asset. Meanwhile, Trump’s campaign has lodged a complaint against the UK’s Labour party, alleging foreign interference on Harris’s behalf.
Germany’s economy received a welcome boost last week, as its manufacturing sector reported unexpectedly strong figures—the first positive surprise in five months. This raised hopes that Europe’s largest economy might finally be edging away from recession territory after a prolonged period of economic stagnation. Meanwhile, the services sector also defied expectations with a stronger-than-anticipated reading, suggesting that broader recovery might be underway. With the European Central Bank’s upcoming rate cuts, there’s cautious optimism that Germany’s gains could ripple through the Eurozone, giving the bloc a much-needed lift. If these trends persist, Germany’s upturn could mark a crucial turning point for Europe’s economic outlook.
This Week
Sterling faces mounting pressure as Chancellor Rachel Reeves prepares to unveil the Labour government’s first budget on Wednesday, with expectations of £40 billion in tax hikes. This substantial increase would push the UK’s tax burden to its highest since 1948. While the prospect of higher taxes may unsettle taxpayers, Bank of England policymakers could welcome it as a fiscal tightening move, potentially curbing demand and allowing the BoE to accelerate rate cuts. Despite potential for some longer-term growth measures, immediate support for the pound looks uncertain, especially as it continues to slide below $1.30. However, investors may find some reassurance in the government’s focus on deficit reduction and infrastructure, a strategy that could help stabilise sterling over time.
As the Fed pivots back to a hawkish stance, all eyes are on upcoming US economic data, especially with the November policy decision looming. The surprising 50-basis-point rate cut in September now feels distant, with recent economic indicators—particularly CPI—highlighting resilience. Fed officials have been clear: another 50-bps cut is unlikely in the near term, signalling confidence in a “soft landing” for the economy, or even the possibility of avoiding a downturn altogether. This shift has driven Treasury yields higher, bolstering the dollar and signalling continued caution from the Fed. Next week’s data will be closely watched for further insights into economic strength and inflation, setting the tone for the Fed’s next moves.
Key Events
Monday October 28th
17:30 BOC Gov Maclem Speaks
Tuesday October 29th
14:00 US consumer confidence & Job Openings
Wednesday October 30th
All Day German CPI
00:30 Australian CPI
12:15 US Non-Farm Employment Change
12:30 US Advance GDP
Thursday October 31st
01:30 Chinese PMIs
12:30 Canadian GDP & US PCE Price Index
Friday November 1st
07:30 Swiss CPI
12:30 US average hourly earnings & Employment Rate
Have a great week,
The Garton Team.