Despite sterling’s turbulent week, GBP starts today edging ahead of both the dollar and euro. Its gains are minor, just 0.1% in both instances. However, considering last week saw the pound drop more than 1% against both currencies in a single day, it’s an unexpected recovery.
Though, it may speak more to the market’s anxieties regarding the dollar and euro than it does to the pound’s strengths.
Last week was a busy one in the UK. Tuesday saw bond interest rates hit a 27-year high and a resulting plummet in the pound as a spooked market worried Chancellor Rachel Reeves’ autumn budget would have to bring both tax hikes and major spending cuts. Then, after being found to have breached the ministerial code, Angela Rayner resigned her position as deputy Prime Minister on Friday, instigating a wider Labour cabinet reshuffle.
Despite all this change, the pound seems to have found some stability as the bond market calmed down and the message coming from government was that it was a growth-focused reshuffle
For the US, Friday brought news that jobs market had shrunk over the summer, adding only 22,000 jobs in August. Updated figures for previous months, which had already been revised downwards once, revealed that in June the US lost 13,000 jobs. This is the first time the US had had negative job growth since December 2020.
This slowdown in the jobs market is marked by the arrival of President Donald Trump’s administration and the institution of his trade tariffs. With unemployment climbing, there is renewed pressure on the Federal Reserve to cut interest rates when they meet next week.
Tomorrow will bring fresh US payroll data and Thursday sees the US Bureau of Labor Statistics publishing new inflation rate numbers, both of which will inform the Fed’s decision, making this week a decisive one for the US economy.
Speaking of decisive weeks, today the French government votes on the future of Prime Minister François Bayrou. He is expected to lose the confidence vote, which he called to push through his deficit-cutting budget.
Should Bayrou lose, it will force President Emmanuel Macron to find his fifth Prime Minister in two years and become a clear sign that the French government upper and lower houses are caught in deadlock. The impact this will have on the euro is unclear, but if a major player in the EU is politically stalled it will make it difficult to respond to changing threats such as Trump’s tariffs.
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 account manager on 020 7898 0541 to get started.
