A summer trading lull looks set to come to a halt with September risks stacking up hard and fast.
US President Donald Trump’s decision to fire Federal Reserve Governor Lisa Cook and French political turmoil provide a glimpse of what’s to come in a month that historically brings notable market swings as investors reassess portfolios.
“My big concern is that when liquidity comes back after the summer, we see some big market moves,” said St. James’s Place CIO Justin Onuekwusi.
US jobs numbers have become contentious after July data prompted Trump to fire the Bureau of Labor Statistics chief.
So, August’s reading, due on September 5, and the Fed’s September 16–17 meeting come at a time when investors are already concerned about tension between Trump and the central bank.
Fed chief Jerome Powell, whom Trump has pressured to cut rates, signalled a September move in his Jackson Hole speech, but also warned about sticky inflation.
Markets price in a roughly 85 percent chance of a rate cut this month, but questions about the Fed’s independence have heightened uncertainty over the rate outlook and its ability to control inflation.
“This latest political drama reignites concerns about the independence of the Fed, and by extension undermines confidence in the US as the global benchmark for transparent and rules-based capital markets,” said Swissquote Bank senior analyst Ipek Ozkardeskaya.
French Prime Minister Francois Bayrou is expected to lose a September 8 confidence vote over government budget-cut plans, highlighting risks to European shares, French banks and long-term French bonds, yields of which are near their highest since 2011 .
If the minority government falls, President Emmanuel Macron could install a new premier or dissolve parliament and hold new legislative elections, leaving budget issues unresolved for longer and raising French ratings downgrade risks.
