Pound gains back some of last week’s losses

By Ashley Finill

The start of this trading week has been a much better one than last for sterling as it’s been lifted from the historic lows seen week. This dramatic drop was due to the UK Government delivering an emergency mini-budget statement to help the suffering UK economy. However, the economic plan had the reverse effect and sent shockwaves into the currency market with investors running to the hills from the pound. There were unprecedented movements in the currency market for sterling; GBP/EUR rose and fell 7 cents, and 9 cents for GBP/USD. Sterling has now gained back some of the ground it had lost but market analysts are warning this is a market recovering from oversold conditions and the comeback may not last. With the cost of living still on the rise and inflation figures which are to be posted later this month which is also expected to rise it will be all on eyes on the Bank of England to step in again to help stall the staggering rise of inflation in the country. However, last month the BoE were expected to raise rates by 25 basis points more than they did and a 50 basis points raise only just made it over the line with a 5 to 4 verdict from the monetary policy committee showing that appetite for raising rates isn’t shared by all. These next few weeks are important ones for sterling as it will be clinging on to the regained losses made this week but we have seen over the past couple of months the fragile pound is in a vulnerable state. These sharp drops can come at a big cost should you have euro or dollar requirements. It may be worth getting in contact with your currency consultant to discuss your options so you are not caught out in these uncertain times.

This Government is for turning

This week the Conservative Party holds their annual conference in Birmingham and there have already been a few key points ahead of the final day today when Liz Truss makes her speech to the Party and public. After the disastrous couple of weeks for the Chancellor of the Exchequer, Kwasi Kwarteng spoke to the conference yesterday. He announced the U-turn on his fiscal plans with the quote “we get it, we have listened”; it may have been more watching than listening as the Pound had slammed against the majors, moments after his original planned has been announced. There has also been further confusion coming from his speech as the chancellor has announced that he was bringing forward his medium-term fiscal plan from November to October, however this has also been reversed and the plan will be announced in November. Liz Truss and her Cabinet have only been in power for just over a month and there has been array of controversy, back tracking, and fumbling. A latest YouGov poll have a labour ahead of over 19.5% and with trust and patience diminishing with the public for the Conservative Party there is currently likely to be change in Westminster come 2024, this may seem far enough away but as we know certainty is not sterling’s friend and with uncertainty with UK politics the Pound may find itself under further pressure over these next few months.

Remaining Data today and this week

As we are only a few days into the new month of October there is a raft of data to be released over the next few weeks. With 3 working days left this week there are some important releases to take note of which are likely to cause movements in the currency markets.  Starting in the US at 1.15pm ADP Employment changes is posted along with Good and Services Trade balance, as is S&P and ISM PMI data later in the afternoon at 3pm. Over to Thursday and overnight Australia releases export, import and Trade Balance figures. At 10am the Eurozone release retail sales figures. At 1.30pm the US post initial Jobless claims, Friday sees a quieter day with only the unemployment rate announced in Switzerland being the key release of the day.