By Matthew Boyle
The pound will take centre stage this week as the Labour conference gets underway and all eyes focus on Rachel Reeves, ahead of the incoming Autumn budget on 26th November.
It’s been a rough few weeks for the pound, seeing it push close to two-year lows against the Euro following poor GDP, jobless and PMI data. Currently it sits close to the bottom of a multi-month range and looks set to either rebound or push to a new lower range.
And this week could well be critical in determining that. UK GDP data on Tuesday and Eurozone inflation data on Wednesday dominate the Eco stats although the ECB look unlikely to do anything with interest rates for now, so the response to inflation on Wednesday could be muted.
In the UK high inflation has staved off a second interest rate drop by the Bank of England, keeping the pound buoyed in the short term; poor eco-stats and the incoming budget have left it weak. Markets will watch closely this week for comments and clues from Reeves as to what her budgetary plans will be.
Labour are calling for public spending to be unleashed but with a £30-50 billion black hole to fill, without significant tax hikes or spending cuts this would mean breaking the rules on government borrowing. With the UK bond market already under pressure and interest rates high, if the rules come under pressure foreign investors could take flight.
With GBP/EUR positioned as it is, the market looks set for a rebound or the GBP to drop further to multi year lows.
Should you have a requirement to either buy or sell Euros speak to your consultant today who can provide guidance on how you can avoid market risk.
Elsewhere in the world, the USD has clawed back ground against both the Euro and Pound.
Whilst the US economy is showing shoots of growth in manufacturing and jobs, inflation remains high and the Fed are still struggling to manage interest rates in agreement with the US government. Perhaps expect the Dollar to remain volatile within the recent 2 cent range we have seen against the single currency.
This week will likely determine the road on the coming months for the pound against the greenback.
Speak to the team at A Place in the Sun Currency to make your money go further.
This week’s economic data
Monday
09.00 EUR Consumer confidence
14.00 USD Home Sales Data
Tuesday
06.00 EUR German Retail Sales
06.00 GBP GDP data
12.00 GBP German inflation data
Wednesday
09.00 EUR Inflation data
12.15 USD Employment change
Thursday
09.15 CHF Inflation Data
12.30 USD Jobless claims
Friday
09.40 EUR ECB President Lagardes Speech
12.30 USD Unemployment rate 14.00 USD PMI data