By Ashley Finill
Friday saw an eventful ending to the week on the currency markets, as data releases and political news caused volatility throughout the day’s trading.
Starting with data, as Retail Sales in the UK came in better than expected with a month of month rise of 0.6% above the 0.3% expectation, which gave Sterling an early boost in Friday morning trading. However, this was short lived due to political events in the UK as Labour continues to feel the heat with the ever present economic crisis in the UK (as borrowing hit a 27 year high), the cost of living crisis still ongoing with inflation on the rise, and problems with members of its own party. Deputy leader Angela Rayner stepped down from her position on Friday morning after an ethics report found that she had not paid the right amount of stamp duty when buying her second home, which she had admitted earlier in the week after a report had been released in the media uncovering the story.
This left prime minister Kier Starmer without a deputy leader. The departure of Rayner was followed up with a major reshuffle of his cabinet where 12 positions were vacated and filled. With such big changes, brings more uncertainty rather than stability to sterling and as such has seen the Pound on rocky ground for the last few weeks falling against both the Euro and the US dollar across the last few months. One of the cabinet members to survive the reshuffle was the chancellor of the exchequer Rachel Reeves who delivers her budget for the next fiscal year on the 26th of November. Last year’s budget was met with disappointment for business with taxes raised despite promises by the new government on their manifesto at the time that that no such tax increases would happen. When the budget was delivered with tax increases included, sterling spiralled losing around 2 cents of both the majors. This year, whispers and predictions of tax rises have already started to filter through the media and should tax hikes come to fruition, the pound will potentially react in the same fashion as last year, down. With uncertain times ahead it may be prudent to speak to your currency consultant today, to discuss your options and mitigate your risk ahead of your property purchase or any currency needs.
Not all Bad for Sterling
It wasn’t all doom and gloom on Friday for the pound, as Sterling strengthened against the US dollar, as their economy continues to struggle this time from jobs, with a big miss of the expected 75k jobs to be added to only recording 22k. This gave the pound a boost in Friday afternoon trading and it gained around cent on the greenback, at the time of writing around a half a cent of those gains have been reversed since the weekend. Although Sterling is struggling against the Euro, it is worth noting that year on year, the pound has made steady gains on other major currencies across globe that is worth considering should you have any requirements ahead. GBP/USD is nearly 3% up from this time last year as is GBP/AED as is a pegged currency to the Dollar. GBP/CAD is up nearly 5%, GBP/AUD up over 4%, GBP/NZD up over 7%. Should you have a requirement for any of those currencies, it may be worthwhile getting in touch ahead of the budget of November 26th so that we can make your money go further, call us today to discuss your options.
Data this week
A quiet start to the week on the data front as little to note apart from a couple of speeches from members of the ECB & BoE on Tuesday. On Wednesday afternoon the US post PPI at 1.30pm. Onto Thursday and a busier day as the ECB announce their interest rate decision at 1.15pm, a hold is expected, this is likely to be priced in so anything outside of a hold we can expect volatility in the market on Thursday afternoon. At 1.30pm, the US post CPI and initial jobless claims, at 6pm the US also posts their monthly budget statement. A busy end to the week, starting at 7am, Germany post consumer prices. At 7am, the UK post, GDP data, at 7.45am France post CPI, Spain post Harmonised index of consumer prices at 8am and finishing the morning off the UK post Consumer Price index, it is likely the market will be lively around these data releases. Finishing off the week, the US post Michigan Consumer Sentiment at 2pm.