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Wednesday, September 03, 2025
What’s happening: The British pound fell sharply against the US dollar on Tuesday amid heightened fiscal concerns.
What happened: UK’s long-dated government bond yields rose sharply, which sent the GBP/USD forex pair to its lowest level since early August.
Strength in the US dollar also weighed on the forex pair.
Why it matters: The yield on the 30-year gilt climbed to its highest mark since 1998, increasing pressure on Chancellor Rachel Reeves before the Autumn Budget. Reeves is widely projected to raise taxes in a bid to remain on track for her fiscal targets.
Meanwhile, Prime Minister Keir Starmer also disclosed a cabinet reshuffle on Monday.
The US dollar received some support from a rise in Treasury yields ahead of the much-awaited jobs report for further insights into the Federal Reserve’s monetary policy.
Data released on Tuesday showed that the ISM US manufacturing PMI rose to 48.7 in August, from 48.0 in July. However, the manufacturing index remained in the contraction zone and came in short of market projections of 49.0.
US construction spending declined by 0.1% to an annual rate of $2,139.1 billion in July, in-line with market expectations. This marked the ninth straight month of decline.
Meanwhile, an appeals court in the US ruled that most of the tariffs imposed by President Donald Trump are illegal, but allowed them to remain in place until October 14, to give a chance for an appeal to the Supreme Court.
Strength in the US dollar exerted further pressure on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.8% to 98.40 on Tuesday and rose further by around 0.1% this morning.
The GBP/USD fell more than 1% to 1.3392 on Tuesday and slipped further by around 0.2% this morning.
The FTSE 100 index dipped 0.87% to close at 9,116.69 on Tuesday, while the domestically focused FTSE 250 tumbled 2.18% to 21,162.89.
What to watch: Investors await the release of economic data on composite PMI (1230 UAE Time) and services PMI (1230 UAE Time) from the UK today. Analysts expect the UK S&P Global composite PMI to grow to 53 in August, from 51.5 in the previous month. The services PMI is projected to surge to 53.6 in August, versus 51.8 in July.
Data on construction PMI, retail sales and house price index, due to be released later this week, will also remain in focus.
Context: Equity markets in Europe closed lower on Tuesday amid a rise in long-term borrowing costs.
Details: Data released on Tuesday showed that Eurozone’s consumer price inflation accelerated to 2.1% in August, from July’s reading of 2.0%. The figure also came in higher than market estimates of 2.0%. Consumer prices rose 0.2% in August, compared to a flat reading in July.
A global rise in bond yields resulted in profit-taking by investors on Tuesday. Travel and tech sectors were among the worst performing in Europe, falling 3% and 2.7%, respectively.
Shares of Fresenius Medical Care declined more than 5% on Tuesday on concerns around its earnings.
The STOXX Europe 600 Index shed 1.5% to close at 543.17 on Tuesday, while Germany’s DAX 40 tumbled 2.29% to 23,487.33 and France’s CAC 40 fell 0.7% to settle at 7,654.25.
Meanwhile, the EUR/USD forex pair slipped 0.1% to 1.1633, while the EUR/GBP pair gained 0.1% to 0.8701 this morning.
What to watch: Investors await the release of economic data on Eurozone’s HCOB composite PMI (1200 UAE Time), HCOB services PMI (1200 UAE Time), PPI (1300 UAE Time) today. Analysts expect the HCOB Eurozone composite PMI to grow to 51.1 in August, from 50.9 in July. The services PMI is projected to decline to 50.7 in August, from 51 in the previous month. The Eurozone’s industrial producer prices, which rose 0.8% in June, are expected to climb by 0.2% in July.
Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.55%, 0.69% and 0.79%, respectively.
Russian military forces have seized Ukraine’s settlement of Fedorivka in the Donetsk region. The news sent the RUB/USD pair higher in forex trading this morning.
Japan’s S&P Global services PMI rose to 53.1 in August, from a preliminary reading of 52.7. However, the latest figure coming in below July’s 53.6 exerted pressure on the JPY/USD forex pair.
Singapore’s S&P Global PMI fell to 51.2 in August, from 52.7 in the previous month, which sent the SGD/USD pair lower in forex trading this morning.
Vietnam’s S&P Global manufacturing PMI fell to 50.4 in August, from 52.4 in the previous month, exerting pressure on the VND/USD forex pair.
China’s RatingDog general services PMI rose to 53.0 in August, from 52.6 in the previous month. However, the CNY/USD pair came under pressure in forex trading this morning.
Eurozone’s 12-month Bill auction (1410 UAE Time), 3-month Bill auction (1410 UAE Time) and 6-month Bill auction (1410 UAE Time), Germany’s 10-year Bund auction (1330 UAE Time), US MBA mortgage applications (1500 UAE Time), Redbook index (1655 UAE Time), JOLTs job openings (1800 UAE Time), factory orders (1800 UAE Time), JOLTs job quits (1800 UAE Time), 17-week Bill auction (1930 UAE Time) and Fed Beige book (2200 UAE Time), India’s M3 money supply (1530 UAE Time), Brazil’s industrial production (1600 UAE Time), S&P Global services PMI (1700 UAE Time), S&P Global composite PMI (1700 UAE Time), Mexico’s consumer confidence (1600 UAE Time), as well as Canada’s labour productivity (1630 UAE Time) and 5-year Bond auction (2000 UAE Time).
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