Good morning,
In a world where folding phones and AI selfies are all the rage, Apple’s latest iPhone 16 reveal brought… a button. Yes, the tech giant’s big play is a camera button, on the outside. While Apple insists its new AI-driven features will “push boundaries,” skeptics are eyeing the competition, who’ve been AI-ing their devices for ages. As for the much-hyped “Apple Intelligence” tools, they won’t be ready until December in the UK—because what’s a groundbreaking innovation without a little waiting? With a flat stock price and the pressure on, Apple’s next big leap might just be a small step.
Last Week
With US inflation hitting its lowest point since 2021, markets are bracing for the possibility of a 50bp rate cut at the Federal Reserve’s meeting next week. The dollar weakened, and stock markets rose as investors grew optimistic about a more substantial cut. Meanwhile, Donald Trump has ramped up threats of higher tariffs, aiming to win over blue-collar voters in key swing states ahead of November’s election. In a heated debate, Kamala Harris scored points against Trump on issues like inflation and trade, but despite this, polls show the former president leading in pivotal battlegrounds that will decide the outcome.
Sterling’s strong summer rally appears to be losing steam as market sentiment shifts. The optimism that buoyed the pound following Labour’s return to power in July is fading, particularly as Prime Minister Keir Starmer’s government implements more contentious policies. Reductions to winter fuel payments and the prospect of a tough Autumn budget have raised concerns among investors. Adding to the uncertainty, the Bank of England could accelerate its bond sales this month, with the Monetary Policy Committee set to determine the pace of quantitative tightening. Combined with global stock market volatility, these factors are putting pressure on the pound, which fell sharply against the euro last week.
The European Central Bank (ECB) cut interest rates again last week, lowering its main deposit rate to 3.5%, as concerns about recession in the eurozone grow. The move, while expected, had little impact on the euro as investors were more focused on President Lagarde’s forward guidance. However, Lagarde offered little clarity, suggesting future decisions would be data-driven. The ECB’s cautious approach reflects weaker growth across the bloc, and its new forecasts indicate a lower growth outlook but a slightly higher core inflation path. This reluctance to commit to further cuts could keep the euro supported in the near term, as other central banks remain more hesitant to ease.
This Week
As the Federal Reserve’s September meeting looms, speculation is rife over the size of the anticipated rate cut. Investors, initially spooked by July’s weak US employment report, have been closely watching inflation and jobs data. Although the August CPI remained stubbornly high, the possibility of a 50bps cut has not been ruled out, with some betting on a larger reduction. However, with solid Q3 GDP growth projected at 2.5%, a more modest 25bps cut seems likely. If the Fed opts for the smaller cut, the dollar may strengthen, but much will depend on the accompanying dot plot and Chair Powell’s future guidance.
On Thursday, the Bank of England (BoE) will take centre stage after its recent 25bps rate cut. With July and August PMIs exceeding expectations and services inflation remaining high, officials are likely to hold rates steady this time. Governor Bailey has indicated that the BoE is in no rush to cut further, and market consensus reflects an 80% chance of no action. Investors will focus on any forward guidance, with two more cuts expected by year-end. Meanwhile, on Friday, the Bank of Japan is set to meet, but no immediate rate changes are anticipated, keeping attention on signals for future hikes.
Key Events
Tuesday 17th September
13:30 US core retail sales & Canadian CPI
Wednesday 18th September
19:00 US Fed Rate Statement
19:30 US FOMC Press Conference
23:45 New Zealand GDP
Thursday 19th September
02:30 Australian Unemployment Rate
12:00 UK Official Bank Rate
13:30 US Unemployment Claims
Friday 20th September
07:00 UK Retail Sales
13:15 Canadian Gov Macklem Speaks
13:30 Canadian Retail Sales
Have a great week,
The Garton Team.