Introduction
The Chancellor of the Exchequer John Healey has picked 28 October 2026 for his first Government Autumn Statement, or 'the budget' as we still commonly refer to it. It is likely to set the tone for Prime Minister Andy Burnham's Government and its priorities.
Whilst the constant change in British government brings us yet another 'fiscal event', the volatility of the war in the Middle East and amongst chip stocks are now becoming predictable.
UK
The Chancellor made clear in his comments that the focus of his first budget would be on “fiscal discipline” and ‘kickstarting growth’, adding "This will be a budget that moves money and power out of Westminster, and into every postcode around Britain. It will be built on fiscal discipline."
Although the Government is now headed by different people, much of the economic, fiscal, and monetary issues that plagued Rachel Reeves and Sir Keir Starmer have not gone away, and the rhetoric around fiscal discipline is similar to that of Rachel Reeves.
It is impossible to know what changes will come before Healey stands up at the dispatch box in the House of Commons. One of the biggest criticisms levelled at former Labour Chancellor Rachel Reeves was that she set the date of her Autumn Budget 2025 too late, falling on 26 November 2025. This led to months of speculation in the press ahead of the announcements and accusations of economic damage due to the uncertainty it caused.
The new Chancellor has therefore been quick to announce when his Budget will occur and set it at a more typical time. However, in his first weeks as Prime Minister, Andy Burnham made eye-catching announcements such as cutting VAT on energy bills, but he also allowed speculation about reforms to taxes such as council tax and the income tax personal allowance to run rife. The gilt market also remains on edge pending the Autumn Statement.
Although some speculation was quashed, it still continues and likely won’t dim down before October. In 2025, that speculation led to some people making financial decisions they now regret. It is critical therefore to not act on any media speculation and ask us if you have any doubts or concerns ahead of the new announcements.
UK inflation data released on 19 August showed CPI rising to 2.9% in the year to July, up from 2.6% in June and the first increase in the annual rate since March, driven chiefly by a 13% rise in Ofgem's energy price cap that fed through into a 14.7% jump in gas prices. Chancellor John Healey pointed to the continuing impact of the Iran war as the primary cause of inflation, whilst the opposition accused the government of leaving the UK unprepared for global shocks.
Employment rates remain a month to month concern, with an increased focus on young people. Data from Statistica shows that in the second quarter of 2026, the employment rate in the United Kingdom was highest among 35-to-49-year-olds, with 84.5 percent of that age group employed. Around 13.3 percent of over 65s were employed during that same quarter, and the employment rate for 16 to 24s was just 50.7 percent, one of the lowest rates recorded for this age group.
Andrew Bailey, who had voted late July in favour of holding the Bank of England's interest rates, used the Jackson Hole Symposium to strike a ' wait and see' tone, telling Bloomburg TV “We’re seeing quite subdued second-round effects. I think we’ve seen a softening labor market for some time now. I’ve taken the view that I think we can watch this situation for the moment.”
Market pricing at month-end implied only a modest probability of a Bank of England hike at its 17 September meeting, with most of the expected tightening pushed out to December and February 2027.
United States
US equities spent much of August digesting the aftershocks of July's chip-stock rout. A fresh wave of volatility hit in the third week after reports that some of Nvidia's biggest customers had been told to expect price increases of more than 15% on its upcoming Vera Rubin and Blackwell servers, sending Nvidia into a seven-session losing streak, its longest since 2022.
That reversed sharply after Nvidia's second-quarter results on 26 August. Revenue of $96.2 billion, up 106% year-on-year, and earnings of $2.22 a share comfortably beat expectations, while CEO Jensen Huang forecast 70% revenue growth for fiscal 2028, far above the roughly 44% analysts had pencilled in. The stock jumped by over 7% overnight following the results announcement, and lifted both the Nasdaq Composite and the S&P 500. It was supported by Amazon Web Services separately confirming a deal to buy two million Nvidia GPUs. This again evidences the enormous underlying demand, alongside extreme market expectations which have little patience for anything other than a blowout quarter.
Federal Reserve Chair Kevin Warsh gave his first address as chair to the Jackson Hole symposium on 28th August, having so far avoided giving markets much in the way of forward guidance since taking over from Jerome Powell in May. His tone was hawkish. He said inflation remained the Fed's biggest problem, that this summer's price readings did not point to a meaningful improvement in underlying trends, and that markets should not expect the Fed to spell out its next move. With CPI running at 3.4% and the Fed's preferred PCE measure closer to 3.7% for the year to July, investors took the remarks as a signal that a rate hike is now firmly back on the table. The next Committee meeting is 15-16 September.
The Strait of Hormuz was the other dominant story of the month. Early August brought genuine optimism, with the US, Iran and Oman closing in on a temporary framework to restore shipping traffic and Treasury Secretary Scott Bessent suggesting a deal could be reached "today or tomorrow". Brent crude fell over 5% to around $79.50 a barrel on the news.
Talks dragged on through the month without a firm agreement, however, and shipping through the Strait stayed at a fraction of pre-war levels throughout. Iran continued to insist the Strait remained effectively closed and under its control and the US continued to maintain its naval blockade. The uneasy pause broke at the end of August, when US forces struck Iranian rocket launchers on Larak Island that had reportedly been preparing sea mines, and Iran responded with strikes on US-linked targets in Jordan and the UAE. Brent jumped back above $90 a barrel, reversing much of the prior week's decline, as markets absorbed the return of open hostilities after roughly a month of relative calm. It is a familiar pattern, repeating every month.
Europe
The European Central Bank (ECB) held no scheduled meeting in August, leaving its July settings in place. The deposit rate at 2.25% and the other two key rates unchanged, following June's hike.
At Jackson Hole, ECB Governing Council member Martin Kocher struck a notably more upbeat note than markets had been expecting, saying the Euro area economy was showing "more momentum" than many had assumed, while adding there was continued alertness rather than complacency on inflation. This positivity was also reflected in the latest monthly data from the European Commission showed a seven month high in economic confidence and sentiment. Fellow Governing Council member Primoz Dolenc told Bloomberg that resilience in the region’s economy and the persistent conflict in the Middle East suggest the need to hike rates in September. Christine Lagarde was a notable absentee at Jackson Hole this year.
Flash figures suggest annual inflation rate in the Eurozone rose to 3.3% in August 2026, up from 2.9% in July 2026. Markets are pricing in a 0.25% rate increase to 2.5% as a result.
Far East
China's slowdown extended into the third quarter. July data released on 17 August showed industrial production growth easing to 4.5% year-on-year, down from June and below the 4.8% forecast, while retail sales grew just 0.6%, missing expectations of 1.5% and the weakest pace since the depths of last year.
Urban fixed-asset investment contracted 6.7% for the year to date and the urban unemployment rate ticked up to 5.2%. Officials pointed in part to disruptive summer weather from three typhoons during the month forcing millions of people to relocate across China’s eastern and southern manufacturing hubs. This compounded the longer term problem of persistently weak domestic demand, and reiterated calls for China to accelerate its shift toward new growth drivers.
Manufacturing activity data released at month-end offered a slightly brighter note. The official PMI came in at 49.8 for August, still in contraction for a second straight month but better than forecasted and up from July's 49.2, with new export orders recovering to just above the 50 expansion threshold.
The Bank of Japan continued to signal it is edging toward tighter policy, with reports through August suggesting the BOJ is now eyeing a possible rate hike as soon as its September meeting and a faster subsequent pace of tightening than markets had priced in, pushing 10-year bond yields to multi-decade highs.
Japanese equities remained choppy with a weaker yen offering some support to exporters even as rising rate expectations weighed on valuations.
Emerging Markets
South Korea's KOSPI had one of its wildest months on record. Having plunged into late July on the same chip-valuation anxiety that hit Wall Street, the index staged a dramatic recovery, including a 22% rally in 10 days, as global AI-trade optimism returned.
The El Niño picture flagged in July remained live despite being slightly less alarming in the near term. The World Meteorological Organization and NOAA continued to put the probability of El Niño conditions persisting from August through November at close to or above 90%, with NOAA maintaining a meaningful chance of the event becoming "very strong" later in the year.
Certain emerging market countries are especially vulnerable to the likely consequences of an El Niño, such as drought, including the rapidly developing economic powerhouse, India. India's Meteorological Department's mid-August update, however, pointed to near-normal rainfall nationally in the short term, easing some of the immediate concern around this year's monsoon even as the medium-term risk to crop yields and food prices remains on watchlists across South Asia, East and Southern Africa and parts of Latin America.
Summary
August was, in many ways, a repeat of July. It was defined by the same AI-valuation nerves, the same fragile Iran ceasefire, and the same central banks trying to hold the line on rates while inflation refused to fully cooperate. The month began with hope that a deal to reopen the Strait of Hormuz was imminent and ended with US and Iranian forces exchanging fire again, oil back above $90, and shipping through the Strait still running at a trickle. Chip stocks swung from a seven-day Nvidia losing streak and a trillion-dollar reminder of how far AI valuations have run, to a blowout earnings report that reset the narrative once again.
Kevin Warsh used his first Jackson Hole address as Fed chair to reinforce his low-guidance, high-vigilance approach, and markets responded by pushing September rate-hike odds sharply higher. With the Fed, the ECB and the Bank of England all due to meet in the first half of September, and the Bank of Japan reportedly weighing its own move, global investors have a watchful eye on how economic policymakers will respond to inflation.
And finally...
Did you know that the the slang term 'buck' for an American $1 dates back to colonial times. Back then deer skins (or buckskins) were traded for goods. Once US currency replaced animal skins as a way to pay for goods, the term “buck” remained as a slang term for one dollar.
The first recorded use of the term was in 1748 when Conrad Weiser noted in his journal that someone was robbed of 300 bucks' worth of items, also noting that five bucks were worth a cask of whiskey!
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