The Pound Sterling is holding steady during the North American session on Monday, as the US government shutdown enters its sixth day. This situation has resulted in financial markets operating without clear guidance, given the absence of economic data. GBP/USD is currently trading at approximately 1.3474, showing little to no movement.
Market participants prepare for an extended halt as the White House cautions of widespread federal job losses if an agreement is not achieved. Deutsche Bank cautions that UoM Consumer Sentiment may reach unprecedented lows as confidence diminishes amid fiscal impasse. UK data remains limited; the Construction PMI shows a slight improvement, whereas ONS revisions heighten worries regarding the decline in household savings.
> Sterling stabilizes around 1.3470 as markets operate in the absence of data; upcoming Senate vote and Fed speakers are set to influence the week ahead : The US Senate is scheduled to cast a vote late Monday regarding a House bill aimed at temporarily funding the government. The White House maintained its pressure on Democrats, presenting them with another opportunity to approve the spending bill prior to commencing widespread layoffs of federal employees. The US docket is set to include remarks from Federal Reserve officials over the course of the week, in addition to the minutes from the most recent Federal Open Market Committee meeting. The anticipated economic data release is projected to be lackluster, as traders await the University of Michigan Consumer Sentiment report set for Friday, which is expected to decline, as per analysts. It was noted that “historically confidence has fallen during shutdowns, so we’ll see if that creeps into the data.” There is a possibility that we may observe a record low falling below the 50.0 reading recorded in June 2022. Our economists project a figure of 50.1, compared to 55 in the prior month.
In the UK, economic indicators are sparse, as S&P Global has reported an increase in the Construction PMI for September, rising from 45.5 to 46.2. The UK economy is experiencing a decline, particularly in light of the ongoing revisions to the Office for National Statistics data, which have raised concerns regarding the extent of household savings. The disparity between the US and UK central banks may support additional gains for the pair. Nonetheless, the emergence of a stagflationary scenario in the UK, coupled with a prolonged extension of the US government shutdown, could enhance the appeal of the US Dollar, given its status as a safe haven.