Sterling Retreats Once Again

By Simon Eastman

Thursday saw the pound lose momentum yet again, having made some gains following the closing speech from PM Liz Truss at the Conservative Party Conference in Birmingham.

We saw a decent rally on both GBPEUR and GBPUSD Wednesday as the new PM came out seemingly strong and in control, giving listeners optimism from a shambolic start to her new governments lead. But true to form of late, as we saw following Kwasi’s U-turn, when the pound makes gains, they are short lived and retreat almost as quickly as they come.

Yesterday was no different, with the pound on the backfoot from the off. Despite poor EU retail sales early doors, which came in with a negative 2 percent reading over the expected negative 1.7 percent, sterling still lost ground against the single currency. German factory orders were also down month on month with a negative 2.4 percent opposed to the hoped for, negative 0.7 percent. So, while the ECB held a low key accounts policy meeting, the euro managed to make gains over sterling for the mornings trade, only relenting slightly at lunch, as the US markets opened and steadied themselves, before continuing to take more gains over the rest of the day.

Meanwhile Stateside, as New York rose and shined, despite the jobless claims data falling way short of the forecasts, markets took no notice as they wait for the all-important non-farm payrolls and average earnings figures today (1.30pm). Markets are also looking forward to the next Fed meeting as hawkish comments from members indicate we are likely to see yet another interest rate rise, markets pricing in an 80 percent chance of another 75 BSP hike. Having already lost a cent to the greenback in the morning, the pound continued to lose another cent and a half by the close of UK trade.

Today we have German industrial production and retail sales early doors, followed by a speech from the Bank of England member David Ramsden introducing their quarterly (Q3) bulletin. Its then across the pond for the US and Canadian jobs data including US non-farm payrolls and unemployment and average earnings data for both. A couple of Fed member speeches round off the day.

In other news, no doubt giving way to some safe haven investing into the US dollar, was news that initial findings into the Nord Strem pipeline leaks by a Swedish probe, which announced “detonations” caused the multiple leaks we saw recently as gas streamed from the pipeline into the Baltic Sea. The investigation found detonations near both pipe 1 and 2 resulted in “extensive damage”. NATO and the EU have both said they believe its an act of sabotage, although Russia strongly deny any involvement.

This kind of report can only fuel the ongoing fire surrounding the war in Ukraine and the fear of escalation by Putin, which we have seen since it started has resulted in massive swings in the currency markets. One would be prudent to expect further volatility as time goes on and as we have already seen, the pound is certainly feeling the brunt of investor sentiment. Those with a currency requirement coming up in the coming weeks or months, might find benefit in speaking to one of the team at your earliest convenience to discuss the options available to minimise your exposure and risk, such as a Forward contract or Stop Loss order.  Speak to the team to find out more.