TGIF! Big week for the currency markets today, and for the nation!! Just focusing on GBP today as the Dollar and Euro have been fairly steady this week…
Against the Dollar we are up 2% and against the Euro 1%! About time really; particularly on the USD nearly breaking the key psychological level of 1.20.
GBP has primarily been aided by rallying global stock markets as investors return to stocks on the belief the Federal Reserve will now enter a realm of smaller rate hikes. This is an ideal platform for GBP to start a small and steady recovery as we enter the festive period as external global conditions are key for us. Notwithstanding the fact that Liz Truss and Kwasi Kwarteng now seem a distant memory, Sunak and Hunt have managed to plug the £55BN deficit a fortnight ago with some discreet tax hikes and spending cuts. In addition this week’s PMI’s weren’t amazing, however much better than they were expected.
Another boost came from the Supreme Court by rejecting a bid by the Scottish government to hold a unilateral referendum on independence, eliminating a potentially significant source of political uncertainty. If the court ruling had gone the other way, a sharp GBP would have likely ensued.
Bear with me on this last point. Oil prices have also retreated significantly this week as a cap on Russian oil exports was reportedly likely to be set higher than expected, easing concerns Russia would supply for the market. Further down impetus to oil comes amidst news of new Chinese lockdowns which should ensure demand from the world’s largest economy remains below long-term trends. For the UK, lower oil prices are a significant deflationary event, which is ultimately supportive of the Pound. Still with me? Lower oil prices = Higher GBP!!
Here to help if you need a chat 😊
If I don’t hear from you have a good day, enjoy your weekend and the match tonight.