By Matthew Boyle
Last week saw the Pound fall to the lowest levels against the USD since June, as US stock markets posted the first back-to-back days of growth in months and high interest rate yields encouraged investors to the US bond market. This USD strength may continue as US policy makers have not rules out further interest rate hikes despite the fact previously the consensus was the Fed had finished their current programme. The FOMC stated further hikes “may” necessary but would be data dependant and as such opened a door that seemed previously shut and in doing so giving the Dolar some renewed strength.
Whilst GBP>EUR fell to the lowest levels since June, against the Euro losses seemed marginal, dropping around a cent by the end of the week but still keeping good pace with the single currency and sitting close to the highest buying levels we have seen within 12 months.
Poor data on Wednesday and Thursday didn’t help the Pound as PMI data pointed strongly towards recessionary conditions in the manufacturing and production sectors and business survey data on Thursday supported the outlook that the UK economy is starting to slow. Whilst these data releases often magnify the ups and downs given the UK has so narrowly escaped recession thus far it could be a stark warning for the coming months. With interest rates so high it feels the mortgage market is a ticking time bomb and despite some respite coming in October with the Government price cap energy scheme, individuals and business alike begin to feel the pinch as the colder weather sets in and gas and electric heaters are fired up.
The week ahead is quiet in terms of data from the UK. German GFK consumer confidence data weaker then expected this morning has allowed GBP to claw back a minor gain of around 25 cents against EUR. German inflation data and US GBP are the main releases Wednesday to watch. Thursday EUR inflation data is no doubt the biggest release of the week with it linked to the ECB interest rate programme. On Friday US manufacturing and production data in the afternoon conclude the weeks major releases to note.
With little data from the UK, rates will be driven from elsewhere and with sentiment towards the pound negative we could see GBP buying rate suffer. Speak to your the team at A Place in the Sun Currency today if you have any upcoming requirements.