Although tropical storm Harvey continues to wreak havoc across the US, the economic impact of it will not be felt until the September figures at the earliest. It was therefore particularly good news that the markets recovered from the shock of North Korea’s missile firing and the US posted better-than-expected GDP numbers.
However, just as tensions had appeared to be dying down, Donald Trump Tweeted (of course), and said “The U.S. has been talking to North Korea, and paying them extortion money, for 25 years. Talking is not the answer!”. Tensions were immediately raised again and the world continues to watch developments closely.
Back to the good news. The US economy grew by 3% in the second quarter, which was revised up from 2.6% and – importantly – the higher growth came from more consumer spending and non-residential investment. In addition, the ADP jobs report came in at 237,000 against an expectation of 185,000. Whether these trends can continue is far from certain, but if they do it will once again raise the question of whether a US interest rate hike could be on the cards. Any discussions surrounding this could lead to a strengthening of the dollar, but opinion is divided on whether the Fed can entertain such an idea at the minute.
Later today we have the unemployment claims, but attention will mainly be on the non-farm payrolls which are released tomorrow.