ECB: Macro Since Last ECB: Growth - Mfg PMIs Finally In Positive Territory [2/2]
- As for soft indicators, the August PMIs were mixed by sector relative to July with manufacturing continuing to improve but services unwinding the previous month’s improvement.
- It saw the composite PMI increase 0.1pt to 51.0 for its joint highest since May 2024. Within that, the manufacturing survey increased for an eighth consecutive month to a 38-month high, even if that’s only just back into expansionary territory at 50.7.
- Nevertheless, that’s still showing some relative resilience compared to potential scenarios envisaged under aggressive US trade policy. Press release: “While the pace of expansion ticked up to a one-year high, it remained sluggish overall. The service sector held back overall growth, with output rising only marginally. Nevertheless, for the first time since May 2024, private sector firms reported greater volumes of incoming new work and employment growth was its quickest in 14 months”.
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US: Artificial Intelligence Could Reduce Number Of Competitive House Seats
Political consultant Bruce Mehlman notes on his Substack that Artificial Intelligence could reduce the number of competitive seats in the House of Representatives in the future, increasing partisanship in Congress.
- Mehlman: “AI promises gerrymandering on steroids — weapons of mass division in the 2025 redistricting wars — with powerful AI models able to (1) precisely-sift unprecedented amounts and unprecedentedly-personal data, (2) compare unlimited potential maps to optimize outcomes. But while AI-enabled cramming could reduce the paltry 20% of seats that are currently competitive, AI-drawn maps might also create more competitive seats by shifting voters out of safer seats (where risk-averse incumbent politicians often prefer them).”
- The report comes amid an acrimonious partisan dispute over redistricting, a process which could determine the balance of power in Congress at the 2026 midterm elections.
Figure 1: Share of Competitive and Partisan House Seats, Over Time
Source: Bruce Mehlman, Cook Political Report
GBPUSD TECHS: Tops 50-day EMA on Hawkish BoE
- RES 4: 1.3681 High Jul 4
- RES 3: 1.3620 High Jul 10
- RES 2: 1.3589 High Jul 24
- RES 1: 1.3477 Low Aug 11
- PRICE: 1.3410 @ 15:28 BST Aug 11
- SUP 1: 1.3144 38.2% retracement of the Jan 13 - Jul 1 bull cycle
- SUP 2: 1.3041 Low Apr 14
- SUP 3: 1.3000 Round number support
- SUP 4: 1.2945 50.0% retracement of the Jan 13 - Jul 1 bull cycle
Prices traded higher early Monday before fading into the close. Nonetheless, recent price action builds on the gains posted after the break of the 50-day EMA on the hawkish turnout to the August BoE rate decision. This firms the speed of the recovery off the 1.3142 pullback low and signals a greater probability of a bullish reversal. For now, S/T momentum is still pointed higher, with the Jul 24 high of 1.3589 the next notable upside level. While the bounce off the pullback low persists, the more medium-term trend remains bearish - but the risk of a return to recent lows has fallen.
US TSYS/OVERNIGHT REPO: ON RRP Takeup Remains Below $100B
Takeup of the Fed's overnight reverse repo facility ticked up by around $2B to $82.2B Monday, the second consecutive daily increase but the 5th day in 6 below the $100B mark.
- ON RRP takeup has averaged $91B in the first 7 sessions of August, compared with $225B over the first 7 sessions in July.
- Helping reduce appetite for ON RRP is the rise in bill issuance since the debt limit was lifted in early July - a dynamic that is expected to keep a lid on the facility for the foreseeable future (outside of spikes typically seen at month-/quarter-end).
