Sterling strengthened against all major currencies yesterday and this morning, following the announcement that Liz Truss will be the new Prime Minister of the UK from later today.
However, the past 24 hours’ rise in sterling of over 1% against the US dollar and 0.35% against the euro followed a drop against the dollar early yesterday to its lowest level for around 35 years. Against the euro it remains close to the levels of early summer.
Liz Truss gave no major policy announcements, other than saying that her government would be focused on “delivery” and economic growth, and saying there will be an energy rescue package for households and possibly small businesses too.
We are yet to hear the make-up of the cabinet, although there are rumours that Kwasi Kwarteng will be chancellor, with a brief toward “fiscal loosening”, including borrowing, tax cuts and spending increases. This may be what has boosted the pound. However the markets will be looking for evidence of fiscal responsibility too.
The surprise data announcement of yesterday was a readjustment for the final reading of Services PMI in the UK to 50.9, after the flash reading had been 52.5. S&P Global Composite PMI was at 49.6, with anything under 50 indicating overall pessimism.
There are various lower level data releases in the coming days, but next week has more top-level data plus a new interest rate decision from the Bank of England.
Thursday sees the interest rate decision from the European Central Bank (ECB), which could well affect GBP/EUR.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Personal Trader on 020 7898 0541 to get started.
