Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The economic crisis gripping Argentina has taken a worrying twist, with the country’s government imposing currency controls in an attempt to support its economy.
Following a 25% slump in the value of the peso during August, Argentina has taken the dramatic move to restrict exporters and citizens when purchasing foreign currency or making transfers abroad.
President Mauricio Macri’s administration announced last night it would take:
“…a series of extraordinary measures to ensure the normal functioning of the economy, to sustain the level of activity and employment and protect the consumers.”
Under the plan:
- Foreign companies will need permission from the central bank to access the foreign exchange market to purchase foreign currency and make transfers abroad.
- Exporters must repatriate earnings from sales abroad.
- Individuals would only be allowed to purchase up to $10,000 a month “to protect savers and achieve greater exchange rate stability”.
The measures are designed to “maintain currency stability”, according to Argentina’s central bank. They also highlight how Argentina is lurching deeper into a new financial crisis.
The move comes three weeks after Macri suffered a shock defeat to left-wing rival Alberto Fernández in presidential primary elections.
That prompted a collapse in share prices in Buenos Aires, weakened Argentina’s bonds dramatically, and sent the peso stumbling.
Last week, Macri’s government said it would delay interest payments on tens of billions of dollars of debt, and try to extend the maturity of the loans. It also hopes to restructure the $44bn loan recently advanced by the IMF.
With fears of a debt default rampant, Argentina’s central bank has been burning through its currency reserves in a bid to prop up the peso.
Currency controls could help, but will also have a damaging impact on its economy.
Also coming up today
New manufacturing PMI reports from around the globe are likely to show that factories are still struggling. Output is thought to have fallen in both the UK and the eurozone in August, as the US-China trade war hits demand.
That trade war deepened last weekend, as America imposed fresh tariffs on $112bn (£92bn) of Chinese imports such as shoes, nappies and food. In response, Beijing began to introduce measures targeting $75bn worth of US goods.
Wall Street will be closed for Labour Day, so the markets could be subdued.
- 9am BST: Eurozone manufacturing PMI for August (expected to remain at 47, showing a contraction).
- 9.30am BST: UK manufacturing PMI for August (expected to rise to 48.4, from 48, showing a slower contraction).