Speaking to reporters on Sunday, President Trump claimed the recession was the prediction of only a few economists while extolling the virtues of his own tax cuts: “We are doing tremendously well. Consumers are rich, tax cut loaded up with money. I saw Walmart numbers through the roof, better than any poll.” Fears for a US recession spiralled last week when the US bond yield curve inverted for the first time in over a decade, an event traditionally viewed as an early indicator of a downturn.
At the same time, the pound struggled to hold ground on Monday.
GBP investors were left unfazed by assurances from Bank of England Governor Mark Carney that the bank has no intention of cutting interest rates, a possibility the European Central Bank is expected to entertain in September.
Mr Carney told Central Banking magazine: “At this stage we do not see negative rates as an option here. I am not criticising others that have used them, but we don’t see it as an option.”
Looking to the week ahead, the spotlight will fall on an annual gathering of central bankers in Wyoming known as the Jackson Hole Symposium.
While a number of notable speakers will attend the summit, Fed chairman Jerome Powell’s speech will underscore the event.
Following the Fed’s July policy decision, Mr Powell, insisted the central bank’s first rate cut in over a decade would not mark the start of a new easing cycle.
However, rising trade uncertainty and signs of a possible US recession have since reignited speculation the Fed may be making provision for further cuts.
If Mr Powell reneges on his previous assurances and signals another cut in September this would see the US dollar stumble at the end of the week.
In the absence of any notable UK economic data, political headlines will be the main catalyst for movement in the pound this week.
GBP exchange rates are likely to fluctuate throughout the session as Jeremy Corbyn’s attempt to garner support for a no-confidence vote in Boris Johnson and cross-party solidarity against a no-deal Brexit gather steam.