GBP: Growth vs pragmatism
EUR: 18 month low vs GBP yesterday
USD: Will push onwards soon
In a few hours, Chancellor Sunak will approach the dispatch box to lay out his plan for the British economy over the coming months as it continues to recover from the Covid-19 pandemic. With possible spending cuts and tax rises, understanding the knock-on effects of this budget will be crucial for all businesses.
Join me tomorrow at 9am in our free webinar to find out what the Autumn Budget means for your business and the implications for the pound in the coming months.
Sterling pushed to a fresh 18 month high against the euro yesterday although has lost these levels in poor overnight trade.
Of course, all focus will fall on sterling today with Chancellor Sunak set to speak from around 12.30 in the Commons and deliver his Autumn Statement. A lot of the content has been widely trailed although there are rumours this morning that a Gordon Brown-esque rabbit out of the hat on universal credit may be delivered.
Given the pressures for those on lower incomes, that may be a welcome reprieve.
We don’t expect sterling to get too volatile this afternoon but will instead be looking to see whether the cuts in spending from this government are enough to damage growth and put rate rises from the Bank of England doubt.
As noted above the euro had a poor day yesterday, slipping to the lowest level in 18 months against the pound and only 1.8% away from its weakest level since the Brexit referendum against sterling. We do expect the weakness to continue as the Eurozone is likely one place that won’t have a central bank stood behind its currency like which is happening in the UK and China to name two.
Rising equity markets are continuing to limit the ability of the USD to truly push on although GDP and inflation data over the course of the coming few days will more than likely be able to change that for the positive.
Ahead of the Federal Reserve meeting next week we are advocating patience but still believe a dollar rally is close at hand.
The AUD thundered higher overnight as local rate expectations were boosted by higher inflation. Traders are now pricing in three interest rate rises down under before the end of next year whilst the Reserve Bank of Australia isn’t expecting to have to pick up the base rate of borrowing until 2024.
Something will have to give soon but for now, the AUD is riding high.
Today's interbank rates at 08:50 against sterling movement vs yesterday.
|US dollar||$1.375 ↓|
|Australian dollar||$1.831 ↓|
|South African rand||R20.57 ↑|
|Japanese yen||¥156.3 ↓|
Have a great day.