Make or break weeks for GBPUSD

Jeremy Thomson-Cook
Jeremy Thomson-Cook 25 October 2021

GBP: Budget due Wednesday lunchtime

EUR: ECB meeting on Thursday set to offer weakness

USD: Time to start pushing higher again

 

Sterling

It’s Budget week here in the UK with Chancellor Sunak set to unveil the government’s new spending agenda Wednesday lunchtime. With all the announcements and leaks over the weekend it will be a surprise if there is anything else to announce on Wednesday itself, but we remain in hope.

We are running a webinar on Thursday morning to take you through the details of what the Budget will mean for your business and the UK economy as a whole. Registration is free but places are limited, you can register here.

As for sterling, we need to make sure that Sunak’s announcements do not cause markets to reprice their expectations from the near-term Bank of England meetings that have been supporting sterling.

In the near term, we must keep an eye on European gas prices as further increases there have seen both sterling and rate expectations in the UK jump higher.

 

Euro

While next week’s Bank of England meeting is being talked up as a huge change for the central bank, we are very much expecting “more of the same” from the European Central Bank on Thursday. There is no way that they can’t acknowledge that inflation has run higher but also they do not want to get dragged into a game of expectations, given the ECB’s dovish proclivities.

Alongside inflation and growth data due this week, we will be able to mark the European economy a lot better against its UK and US counterparts, something we expect to continue to allow for additional euro weakness moving forward.

 

US dollar

With growth and inflation measures due from the US this week amid a strong pick up in US corporate earnings, it's easy to sit here and talk about a higher USD moving forward. We’re a little surprised the USD isn’t higher than where it currently sits although a rebounding equity market and higher commodity prices have taken some of the market attention away from the greenback.

We expect that Thursday’s inflation number will set the hare running for bringing the USD higher as Fed members talk up the prospect of higher interest rates sooner.

 

Elsewhere

The Turkish lira has taken a Manchester United sized beating over the weekend, falling to a record low this morning. The currency was already under pressure following a larger-than-expected rate cut last week and following Turkish President Erdogan’s threat to expel the ambassadors of 10 nations over the weekend, the weakness has continued.

Have a great day.

 

Market rates

Today's Interbank Rates at 08:26am against sterling movement vs Friday.

Euro 1.183
US dollar 1.378
Australian dollar 1.840
South African rand 20.45
Japanese yen 156.8 ↑