Sterling had a positive start to the week, strengthening against almost all major currencies, by between 0.5 and 1%. That has continued this morning, following broadly positive news on employment and earnings, with GBP/USD now at a two-week high.
The catalyst for the pound’s success yesterday was the growth of the UK economy by 0.2% in August. However, growth was slower than market expectations. The new chancellor Kwasi Kwarteng told Treasury staff yesterday to focus entirely on boosting growth to 2.5%. In a conference call to senior officials he is reported to have said that there was a need to do things differently from what his boss Liz Truss has called “abacus economics”.
No such disappointment this morning with unemployment, which fell to its lowest since 1974 at 3.6%. Earnings rose by 5.5% over the past year, (including bonuses) from last month’s 5.2%, and well ahead of expectations. However, given how high inflation is, this represents a fall in disposable income once again.
The euro was boosted against the US dollar by the advances of the Ukrainian army that the markets see as being more likely to ease the energy crisis.
There will be a speech from Andrew Bailey, governor of the Bank of England, at 10am today. Also today, US inflation at 1.30pm will give an indication whether the US Federal Reserve will feel the need to raise rates by 75 or 50 basis points at its next FOMC meeting, and could affect USD.
The Financial Times is reporting that there is some evidence of a compromise between the UK and EU sides over Northern Ireland protocols, or at least that grace periods will be extended.
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