A lively week for sterling has reached Friday with the pound holding on to the 2% gain it made on the euro following the Boris Johnson resignation last week, but not quite at the heights that Wednesday’s better-than-expected GDP data sent it to.
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Poor economic data, fears over winter gas supplies and a new poltical crisis in Italy combined to peg the euro back yesterday. However, currency investors will be closely analysing the policies of different Conservative Party leadership candidates over the next weekend. This morning two key Brexiteers – Steve Baker and Suella Braverman – came out for the foreign secretary Liz Truss. A less hard-line attitude to dealings with the EU is likely to please the currency markets.
Against the US dollar sterling reached fresh lows yesterday. It will take something to weaken below the $1.14 of the early pandemic, but it is currently trading at close to its lowest for 40 years.
Not coincidentally, US inflation was also revealed this week to be at its highest for 40 years, at 9.1%. A large rise in interest rates from the US Federal Reserve at the end of the month now seems inevitable.
The week ends with plenty of data from the US this afternoon, but little from the UK or eurozone.
So far this morning we’ve heard increasing fears of a slowdown in China, shrinking by 2.6% in Q2 and growing just 0.4% over the last year, and a large decline in European car sales.
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