By Ashley Finill
Sterling’s woes continued this week, as yesterday morning the UK posted negative PMI data, which sent the Pound down against the single currency and continued to struggle throughout the day’s trading. This piles more pressure on the already weak UK economy with few positives in sight for Sterling to hold onto. This PMI reading showed that the UK economy has stalled in September owing to fears that tax rises will almost certainly be announced in this year’s budget by Chancellor of the Exchequer; Rachel Reeves, on November 26th.
There are many rumours flying around on what tax hikes will be announced – among them is a switch from last year’s 2p rise in national insurance to instead a 2p rise in income tax, which supposedly would fill a £6 billion black hole, but would also hit pensioners hardest. Other rumoured tax rises could come from capital gains, inheritance and even chocolate! Like last year, media reports for the budget will continue and will almost certainly affect the Pound across the next two months and when the budget is announced. Last year, after the budget had taken place, Sterling dropped by 2 cents within 48 hours, which shows how sensitive the Pound is to such announcements.
Sterling’s Market Performance
As highlighted above, Sterling is not having the best run of form at the moment. Whilst losses continue, some of you may still be holding out for some good fortune and to claw back some recent losses, but with the economy under significant pressure and the budget on the horizon, holding out could be a costly decision.
In the last month, Sterling has dropped nearly 1% against the Euro, with over half of that being lost this week alone. Year on year the Pound is over 5% down against the Euro, which shows sentiment has been far away from Sterling for some time. With negativity still surrounding the currency, due to tax rises and a weakening economy, it could get worse before the close of the year.
Although rates may not look as attractive now as they were a couple of months ago, they could continue to get worse, which is why it may be a good idea to speak to your currency consultant today to look at the options available to mitigate your risk during these uncertain times and to help save you money on your property purchase.
Data remaining this week
All data of note for the UK has been released this week already, but there are still some data releases due out, mainly for Thursday and Friday, which could affect the currency markets.
Today there is only new home sales in the US at 3pm, and then a couple of speeches from BoE’s Greene and FED’s Daly at 5.30pm and 8pm respectively.
Thursday is a busier day – in the morning at 7am Germany posts the GfK consumer confidence survey. Into the afternoon, the US post durable goods orders, GDP and initial jobless claims, all at 12.30pm. Finishing off the day are a raft of FED members speeches from Schmid, Williams, Bowman, Barr, Logan and Daly.
Finishing off the week on Friday, Spain posts GDP at 8am and Canada also posts GDP at 1.30pm. The US posts core personal consumption expenditures, personal income and spending at 1.30pm, and then Michigan consumer expectations and sentiment is posted at 3pm.