By Matthew Vassallo
The Pound ended the week on the front foot, having made gains against both the Euro & US Dollar by the close of trading on Friday.
This upward momentum was in stark contrast to the trend earlier in the week when the Pound had once again come under increasing pressure, against both aforementioned currencies. This downturn was linked at least in part, to the sobering comments made from Bank of England (BoE) governor Andrew Bailey, who grimly predicted that the UK was now heading towards an unavoidable recession, one that was likely to last longer than any previous on record.
Unsurprisingly, the news immediately caused a sell-off of Sterling positions, with investors already tepid risk appetite for Sterling evaporating once again.
Despite this GBP did rally following the release of lower-than-expected inflation figures, which was seen as a major positive by investors. This provided the platform for Sterling’s end of week recovery, with the Pound gaining over 3 cents against the US Dollar whilst solidifying its position against the Euro.
The market’s focus will now be drawn to this Thursday’s budget statement, where Chancellor Jeremy Hunt is expected to announce a variety of tax increases and spending cuts, which are aimed at plugging the current economic deficit and dragging the UK out of recession. Some of the anticipated austerity measures are likely to be severe and unpopular amongst certain quarters. Whilst he has confirmed that the richest will have to carry a proportionate percentage of this economic burden, he warned all households will have to prepared to take a hit, one that is likely to make life hard for the poorest families who are already struggling with the current cost of living crisis.
Looking at the US and the ongoing fallout from the recent mid-term elections continues. The self-projected “red wave” that was being touted by former President Donald Trump did not materialise, with the Republican Party’s ‘success‘ far more muted than even the most optimistic of Democrats had envisaged.
Whilst votes are still being counted to determine the final results, we now know that the Democrats have held onto the Senate and whilst they are likely to lose their majority in the House of Representatives, the margin of loss will be far less than predicted.
The reason for this underwhelming performance?
Many right-wing media outlets, including the Rupert Murdoch run Fox News & Washington Post have made no secret that they are apportioning blame on the former President. Whilst Trump’s endorsed candidates had much success in their primaries, this success was not mirrored when votes were cast amongst the wider electorate.
Is this the beginning of the end for the outspoken former outspoken President? He’s certainly come back from worse.