After strengthening after the Budget and staying strong for the rest of the week, things have started to look a little shaky for sterling – not unlike reaction to the Budget itself.
While the chancellor is defending herself against claims that she misled the public over the state of the public finances, the prime minister is reported to be coming out fighting, reminding the public of the many giveaways in the Budget, including frozen rail fares and lower energy bills. Sir Keir Starmer, it has been briefed, will also be coming out with new plans to tackle the welfare bill.
The dollar has been the big loser recently, with a host of economic data clearly signposting an interest rate cut when the Fed makes its decision next week. While the Fed is leaning doveish, the European Central Bank seems in no hurry to restart cutting rates, despite inflation so far looking under control. When it does move, GBP/EUR will undoubtedly move with it, so do have a chat with your account manager about locking in your rate, on 020 8003 4915.
In the UK, the markets will be continuing to monitor reaction to the Budget. After a weekend of negative headlines for the government – much of the criticism very personally directed at the chancellor – it will be all eyes on the bond markets if her position starts to look under threat.
For now, both GBP/EUR and GBP/USD remain at their best for five weeks.
Over the weekend the left-wing challenger to the Labour Party – now officially named as Your Party – had its first conference, with a large turnout but some leadership tensions. On the right, the Conservative Party also looks to have recovered some of its lost confidence. However these are febrile times in British politics, with a growing sense that ‘something must be done’ amidst much talk of young people emigrating.
