Sterling swung sharply lower yesterday, losing 2% against the US dollar, but retained most of its strength against the euro.
It’s drifted a little further this morning, possibly in reaction to the Halifax House Price Index which has shown a fall in property prices in September – albeit only by 0.1%
Talk is all about energy at the end of the week, with the UK’s National Grid warning of potential blackouts this winter. They say that supplies should be sufficient so long as the feed in from mainland Europe continue, but that otherwise three-hour power cuts would be necessary.
In an attempt to boost energy security, the UK and EU have agreed a deal to bring the UK back into the North Seas Energy Cooperation, with eight EU countries and Norway. Talks led by France have led to a new spirit of cooperation between the PM Liz Truss and President Macron and, potentially, with the EU.
The US has reacted angrily to OPEC, led by Russia and Saudi Arabia, cutting oil production, which will inevitably have the effect of raising inflation.
The other main topic of conversation remains interest rate rises. The dollar has strengthened on the back of hopes for another 75 basis point interest rate rise from the US Federal Reserve on 2nd November. However, rapid rate rises threaten economic expansion, which may be felt in the non-farm payrolls data coming in this afternoon.
The minutes from the ECB’s rate setting committee meeting last month also shows worries that inflation “had started to become self-reinforcing”. A 75 basis-point rise is expected there too.
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