Morning all
2 bombshells in fact, I’m back on the morning updates for the time being.
GBPUSD
Doom and gloom.
We’ve finally broken 1.20, feels like we are quoting GBPEUR! We are now clearly through 2 year lows reflecting traders’ increasing concerns about recession around the world as energy prices continue to soar. ‘Stagflation’ is the current buzz word which crops up on a daily basis. For those of you who don’t know it means: persistent high inflation combined with high unemployment and stagnant demand in a country’s economy = GBP WEAKNESS!!
In addition to the above, there are 2 more elephants in the room –Sajid Javid and (mainly) Rishi Sunak. The market is concerned with growth and the 2 resignations clearly show retraction leading to GBPUSD falling to levels witnessed back in 2020. To add fuel to the fire, the US is performing strongly due to US interest rate rises, thus investors are seeing it as a safe bet = USD STRENGTH
GBPEUR
Gas supply concerns for the EU have led to the EUR weakening significantly. Analysts expected a positive month of trade but were wrong as exports have slowed again and the Yamal pipeline shut down. There is also news of industrial action in Norway, with the situation looking likely that it will get worse as we head into the winter months. It wouldn’t be GBPEUR update without talking about the Russia/Ukraine conflict with Russia clearly holding the cards on European energy supply as we get closer to colder weather.
Have a good day!
James Feltwell