The pound strengthened yesterday against the euro, while falling further against the US dollar. That has continued this morning.
The big economic story yesterday was the fall in stocks (particularly tech stocks) as the economic picture darkened for the larger economies. On the global stage, Federal Reserve Chair Jerome Powell is due to speak at the Jackson Hole Symposium on Friday, and the dollar has been strengthening on the expectation of further interest rate rises.
There were no high-level data releases from the UK yesterday, but shortly we will be hearing services and manufacturing PMI (purchasing manager’s index) for the UK. It is expected to exceed Germany’s which has just come in at 49.8, suggesting a pessimistic outlook among German business people.
In a report yesterday, financial services firm Citi suggested that the UK cost of living is “entering the stratosphere”, potentially hitting 18% early next year.
From Germany, the Bundesbank warned that inflation could hit 10% and the country faces recession. They said: “Declining economic output in the winter months has become much more likely,” due to the risk to gas supplies.
A similar problem with different causes is afflicting China, where drought conditions have interrupted hydro-electric power supplies and closed factories.
These threats have helped to propel the US dollar to its strongest against the pound for also 30 months and to a 20-year high against the single currency.
In UK politics, the arguments over how realistic are Liz Truss’s tax-cutting economic plans continued, with Michael Gove saying they were a “holiday from reality”.
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