UK car production at 1956 level – chips blamed
The global shortage of microchips is having far-reaching impacts. The UK’s July car production dropped to its lowest level since 1956 due to a shortage of supply. There can be no doubt that the same issues are manifesting themselves in other industries as covid lockdowns cause mayhem in the mainly Asian production centres. GBPUSD rate has flattened to below $1.3750 and GBPEUR is similarly contained within a tiny trading range of €1.1620 to €1.1710.
Poor German sentiment hampering Euro
The euro is being held back by poor business and consumer sentiment. Yesterday’s Ifo surveys showed a surprisingly strong reading for German current economic conditions but contraction-signalling levels for business expectations and business climate indices. Add in this morning’s Gfk consumer climate index, which showed a minus 1.2 reading and the climb out from Germany’s covid hole in is obvious. The consumer climate index hasn’t been in positive territory since March 2020 and we all know what happened after that. The EURUSD rate reflects that. It is in a downtrend that extends back to May and is struggling to make it above $1.1750. We will see the minutes from the last ECB meeting this morning. Their plans to support the economic recovery will be interesting to read although I think we have a pretty good handle on their policies already.
Jackson Hole and US GDP are USD hurdles
On the US side of that equation, two things have the potential to shift the dial over the next two days. This afternoon’s US GDP data for Q2 is one of them. 6.7% growth in the six months to June is the forecast. Anything more will give the USD a lift. A poor showing will put those speculating over early monetary tightening back in their boxes. The second factor is the symposium at Jackson Hole – well the virtual meeting that would have been in Jackson Hole which starts today, That virtual congregation of central bankers is either a lot of hot air or the key to the global recovery depends on your viewpoint. However, it could yield views on the US recovery policy that shape how investors position themselves for the future. So it is relevant.
Other than these titbits, it will be a light day for data. I hope yours is a good one.
Just a housekeeping note, Halo is switching to a new phone system as of today. We have been practising with the new system but I will apologise now for any delays in transfers or – heaven forefend – the dropping of calls; especially if you call me because I will confess to being a bit of a Luddite.