The growing prospect of a US interest rate cut next month is buffeting the dollar, sending the pound up to its highest level in over a year.
The dollar lost more ground last night after the minutes of the Federal Reserve’s July meeting were released. They showed that the “vast majority” of policymakers felt it would probably be appropriate to cut rates in September, if economic data continued to come in as expected.
That knocked the dollar index – which tracks the greenback against major rivals including the euro, yen and sterling – to its lowest since last December.
Hopes of a September rate cut were further boosted yesterday by data showing that 818,000 fewer jobs had been created across America than previously thought. Those revisions add to concerns that the economy has been slowing.
The financial markets indicate there’s a 66% chance that the Fed begins with a quarter-point cut to borrowing costs in September, and a 34% chance of a bumper half-point cut. Traders are also pricing in a full percentage point cut in US rates by the end of the year – implying a half-point cut at one of the Fed’s three remaining meetings this year.
Central bankers are gathering in Jackson Hole, Wyoming, today for a closely watched economic symposium. Federal Reserve chair Jerome Powell speaks tomorrow, and is expected to give some guidance about how the Fed may act in the months ahead.
PwC is preparing to face the music in China over its auditing of collapsed property developer Evergrande. The FT reports that PwC China has told clients it expects Chinese authorities to hit it with a six-month business ban, which could start as early as next month.
This would be the toughest ever action by Chinese regulators against a Big Four firm. Back in March, China’s securities watchdog fined Evergrande for inflating its revenue by nearly $80bn over two years before it defaulted on its debt.
Evergrande was forced into liquidation in late January after efforts to restructure its foreign debt failed, following pressure from Beijing for property firms to rein in excessive borrowing.
The agenda • 9am BST: Eurozone flash PMI report for August • 9.30am BST: UK flash PMI report for August • 11am BST: CBI industrial trends report • 12.30pm BST: ECB MPC meeting minutes are published • 1.30pm BST: US weekly jobless report
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