By Lauren Buckner
Sterling continues its rather lacklustre performance this month, as we continue to see exchange rates against both the euro and the US dollar consolidate lower than those seen in the first half of this year, moving in line with a dip in confidence for the UK economic outlook.
Rising inflation continues to be problematic and UK consumer spending habits look like they are beginning to change in response to the sharp rise in the cost of fuel and household bills, while wage growth lags woefully behind. Investors looking at the UK now predict that the Bank of England will begin to prioritise economic growth over spiralling inflation at future policy meetings, with the CIBC predicting a ‘protracted pause’ in policy from the BofE once the base rate hits 1.75%.
Businesses are once again battling rising Covid numbers, both here and in the EU, as the world adjusts to “living with Covid”. With an increase of over 43% in cases in the UK last week and 23% uptick in hospitalisations over the same period, renewed economic pressures are being felt by those at the sharp end, battling with staff absence and zero government support during a time where the virus was hoped to be curtailed by the season. A further knock to business confidence that can not really be afforded at this stage.
An undercurrent of political uncertainty is also holding the Pound back as Nicola Sturgeon ramped up her quest for Scottish independence yesterday, by announcing a date of 19th October 2023 for a new referendum on the subject. Now the subject of both a political and legal challenge, it is clear that for Sturgeon at least the lack of confidence in Boris Johnsons government is too much to bare. Not forgetting a rippling threat of an EU trade war following changes to the Northern Ireland protocol, which were successfully passed through the House of Commons earlier this week.
As the outlook for the UK becomes shrouded in increasing uncertainty the value of the Pound is reflective of this and Sterling appears to be settling in to the current trading levels, with little to suggest a boost in value could occur, at least in the short term. Please speak to your account manager today to discuss upcoming requirements.