Garton Global | Monthly Market Digest
Markets stayed defensive in August as the dollar strengthened on Fed uncertainty and Trump’s pressure on Governor Lisa Cook unsettled investors. The euro slipped on renewed French political turmoil, while sterling’s rebound proved short-lived. Looking ahead, UK borrowing costs at multi-decade highs keep the pound under pressure, the ECB and BoE rate calls are set to steer euro and sterling volatility, and Trump’s overtures to the Fed remain a key risk for the dollar.
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LAST MONTH: AUGUST
🇺🇸 Dollar Strengthened on Fed Uncertainty
● US dollar strengthened against major peers.
● Fed kept rates on hold, but Trump’s push to oust Governor Lisa Cook unsettled markets.
● Political interference raised the risk of looser policy ahead.
● Investors rotated into the dollar as a defensive hedge, lifting Treasury yields.
🇪🇺 Euro Pressured by French Political Turmoil
● Euro fell as French political risk resurfaced.
● Prime Minister François Bayrou faced a confidence vote on deficit-cutting plans.
● Potential government collapse heightened fears of fiscal instability.
● EUR/USD slipped towards 1.16 as investors priced in higher eurozone risk premiums.
🇬🇧 Sterling Rebounded but Gains Proved Short-Lived
● Pound rebounded against the euro before losing momentum.
● Month-end flows briefly lifted GBP/EUR above 1.16.
● The euro regained strength, curbing sterling’s advance.
● Sterling ended August supported but unable to break higher
THIS MONTH: SEPTEMBER
🇬🇧 UK Borrowing Costs Surge as Sterling Slides
● 30-year gilt yield jumped to 5.72%, its highest this century (since 1998).
● The pound fell sharply, with investors viewing higher yields as a sign of fiscal stress rather than support.
● Concerns over fiscal stability ahead of the autumn budget weighed on investor confidence.
● Inflation and rising borrowing costs intensified pressure on public finances.
🇬🇧🇪🇺Euro and Sterling Await Central Bank Decisions
● Sterling stayed under pressure and the euro edged lower ahead of major policy meetings.
● The ECB (11 Sept) is expected to hold rates but could shift guidance on inflation and growth.
● The BoE (18 Sept) faces high inflation and slowing activity, a difficult mix for policy.
● Both meetings are likely to drive sharp moves in EUR/USD and GBP/USD.
🇺🇸 Dollar Faces Risk from Trump’s Fed Pressure
● Markets are watching Trump’s ongoing push to reshape the Fed.
● His campaign against Governor Lisa Cook has shifted attention to how much influence the White House could gain over policy.
● Economists warn this could alter the Fed’s long-term inflation fight.
● The prospect of more Trump-aligned appointments is now a key risk heading into the 17 Sept FOMC.
Have a great Month,
The Garton Team.
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