By Lauren Buckner
The pound has been on a bit of a rollercoaster journey of late, seeing us challenge a 7 month low two weeks ago today and ending last week with pressure on a 19 month high against the Euro – although still failing to breach the 1.18 interbank marker.
This is perhaps a surprising turn of events for Sterling when reading recent press coverage of a tough winter ahead for consumers and businesses given a surge in gas prices over recent weeks and fiscal tightening from the government on universal credits and a pending rise in National insurance next April.
Further pressures have been announced to UK electricity supplies prompting fears of winter blackouts after a recent fire at a connector station in Kent last week which has caused a dramatic reduction in the amount of energy that can be imported via the undersea cable running from Britain to Calais – electricity reserves currently sit at their lowest level in six years. Rising inflation and supply chain issues, particularly for food, add to the dreary outlook which adds further ‘fuel to the fire’ for the Pound’s outlook, suggesting sterling sellers may want to view the current trading levels as a good opportunity to cover their FX requirements.
Brexit pressures continue to mount for both the UK and EU ahead of a speech on Tuesday by David Frost (UK Brexit minister) in Portugal which many predict will criticise the EUs policy over the Northern Ireland protocol and the EUs attempt to pacify tensions by scrapping its recent UK sausage ban as nowhere near enough. Frost is expected to request ‘significant change’ to the negotiated Brexit deal with a real focus on the scope of the European Court of Justice over breaches of the Protocol, which has been the subject of a recent Twitter spat between Frost and Ireland’s minister Simon Coveney. The EU have gone as far as to suggest that the UK government are showing a distinct lack of motivation to progress in UK/EU relations and many now fear a series of snap tariffs to be imposed on UK exports such as Scottish Whisky to begin next year if discussions continue to show a lack of progress on the matter.
US Dollar weakness throughout the week also had an impact on exchange rates as the Euro and the Pound jostled for the top spot amongst the three currencies. A shock to US employment figures on Friday afternoon from the non-farms payrolls (the number of new jobs created outside of the agriculture industry) posted a disappointing 194,000 against expectations of 500,000, showing that the US recovery from Covid is far from steady with the labour market suffering from a shortage of employees and further outbreaks of Covid. Another notch in the barometer of global uncertainty which seems to have been prevalent over recent weeks.
Currency markets are very unpredictable and with so much global uncertainty, and predictions of seasonal challenges for the world through supply chain pressures and a bubbling energy crisis, it could be a case of ‘better the devil you know’ when budgeting for a large exchange of currency. We have the tools available for clients to secure currency rates in advance of requiring payment so please make contact today to discuss these in more detail.
Week ahead calendar;
Monday
GBP – BRC Like-for-like retail sales
Tuesday
GBP – Claimant count Rate (Sep)
GBP – ILO Unemployment Rate
GBP – Average Earnings
EU – ZEW Survey – Economic Sentiment
EU – German ZEW Current Situation & Economic Sentiment
Wednesday
GBP – UK Trade Balance
GBP – Industrial Production
GBP – Manufacturing Production
GBP – Trade Balance
GBP – Gross Domestic Product
EU – German Consumer Price Index
EU – Industrial Production
US – Mortgage Applications
US – Consumer Price Index
US – FOMC Minutes
Thursday
GBP – BofE Credit Conditions survey
US – Producer Price Index
US – Continuing jobless Claims
Friday
EU – European Council Meeting
EU – Trade balance
US – Retail Sales