“America can breathe a sigh of relief,” said Democratic Senate leader Chuck Schumer.

After clearing the House of Representatives the day before, the bill sailed through the Senate on Thursday night and the US Congress finally approved a deal to lift the country’s borrowing limit and avert a catastrophic default on its $31.4 trillion debt.

Referring pointedly to the political wrangling that preceded the deal, Treasury Secretary Janet Yellen said, “I continue to strongly believe that the full faith and credit of the United States must never be used as a bargaining chip.”

Unsurprisingly, global stocks jumped on the news, but the relief rally was tempered as investors – conditioned by the US debt dramas of the past decade – had largely discounted the news. Japan’s Nikkei index ended the week at its highest close since July 1990.

Markets quickly shifted their focus to US jobs data and the likely next move on interest rates by the Federal Reserve. The jobs news left investors more puzzled over whether the Fed will hike, skip or pause. A blockbuster 339,000 jobs were added in May, approaching double expectations, and underlining continued strength in the jobs market despite rising prices and borrowing costs. Yet the unemployment rate jumped to 3.7% and wage growth slowed, suggesting an inflection point in the labour market. Wall Street rallied on the jobs news, with the S&P 500 adding 1.8% on the week.

The Fed now enters its ‘blackout’ period ahead of its next rate-setting meeting, with next week’s CPI inflation report the most significant data point ahead of its decision.

Business surveys released on Thursday revealed that sluggish global demand has deepened the decline in manufacturing activity across Europe and the US and remains a major challenge to Asia’s biggest exporters. The decline in the eurozone was broad-based, with activity falling in the bloc’s four biggest economies: Germany, France, Spain, and Italy. US manufacturing declined for a seventh straight month and China’s factory activity shrank faster than expected to a five-month low.

The weak data illustrated Asia’s patchy recovery from the pandemic, particularly in China, where there are growing signs that the rebound is losing steam. China’s post-pandemic stock rally also appears to be faltering. After surging 20% from October to January, China’s blue-chip index – the CSI 300 – has handed back those gains and is down 1% year-to-date.

There was some good news for the eurozone, where inflation eased more than expected in May. Headline inflation fell to 6.1% from 7% in April, the lowest reading since February last year. However, in a speech in Hanover, European Central Bank (ECB) President Christine Lagarde said inflation was still “too high” and “set to remain so for too long.”

The ECB next meets on 15 June to make its latest interest rate decision. Markets have priced in two more 25 basis point hikes, in June and then July or September, with rates then pausing at 3.75%. Sharp drops in energy inflation should herald a significant spell of disinflation over the summer, although an upward trend in wages remains a concern.

An improving picture for eurozone inflation and dropping oil and gas prices could herald some further moderation in UK inflation in the coming weeks, although the outlook for UK CPI remains consistently higher than elsewhere. Markets are still discounting interest rate hikes of a further 100 basis points by the Bank of England (BoE) through to the end of the year.

British factories reported a sixteenth consecutive month of falling exports in May and blamed the increasing difficulties in trading with Europe due to Brexit barriers. The manufacturing sector contracted for a tenth consecutive month, dragged down by a steady fall in exports.

Former US Treasury Secretary Larry Summers said Brexit will be remembered as an “historic economic error” that damaged the UK economy and drove inflation higher. Research by the London School of Economics estimates that British households have paid £7 billion since Brexit to cover extra cost of trade barriers on food imports from the EU, pushing up annual food bills by an average of £250.

Although welcome news to first-time buyers, confirmation from Nationwide that UK house prices fell at their fastest rate in 14 years in May underlined the headwinds faced by the housing market. The average house price was down 3.4%, the biggest year-on-year drop since 2009 during the global financial crisis. Over 2.5 million owner-occupiers have yet to see their fixed-rate deals go up over the rest of 2023, and with the BoE likely to continue raising borrowing costs, house prices are expected to come under further pressure.

Saving for retirement might not be something you think about starting in childhood but creating a pension for your children could set them up for future financial wellbeing.

Having a growing pension pot offers valuable peace of mind, meaning your children can focus on achieving their financial goals when they reach adulthood and have a better chance for a comfortable retirement. And given that we’re all living longer – one in five girls and one in seven boys born in 2020 are expected to live to 100 ¹ – planning now for your children’s future can have a real positive impact.

A child can have a pension from birth – there’s no minimum age. Only a parent or guardian can open a pension for a child, but once it’s up and running, anyone can contribute – parents, grandparents, godparents, friends or other family members.

Like an adult’s pension, contributions receive a 20% boost from the government – even if your child is not yet a taxpayer. And if the time comes and your child becomes a higher or additional-rate taxpayer, they can claim further relief on future contributions via self-assessment. This tax relief from the government is something you won’t get from an ISA, another tax-efficient saving tool.

In addition, any growth generated by the pension won’t be subject to Income Tax or Capital Gains Tax.

If you’re the child’s parent or guardian, you’ll look after their pension until they turn 18. At that point, control passes to them. But they won’t be able to access their pension until they reach age 55, which is rising to age 57 in 2028.

How much can you pay into a child’s pension?

One key difference between an adult’s pension and a child’s pension is the amount you can contribute each year.

You can pay up to £2,880 into a child’s pension for the 2023/24 tax year. When you take into account the 20% in tax relief from the government, this adds up to £3,600.

While the annual contribution limit for children is much lower than that for adults, the magic of compounding means even small contributions can add up over the long term.

Source: ¹ Past and Projected Period and Cohort Life Tables: 2020-based, UK, 1981 to 2070, Office for National Statistics, January 2022

“No one got everything they wanted but the American people got what they needed. We averted an economic crisis and an economic collapse.”

President Joe Biden reflects on the US House passing the bill to raise the debt ceiling.