Early last week sterling staged a sharp recovery against the euro, which disappeared just as sharply as inflation and other data indicated that the Bank of England’s interest rate rises had already done their job, and no more might be required. It was a similar story for the US dollar, which also weakened.
There’s an absence of influential data releases early this week from the UK side of the equation, and not a great deal from the EU side either. However, don’t assume that the markets won’t keep moving, as Wednesday sees the British chancellor’s Autumn Statement.
If Jeremy Hunt makes a bold move – cutting income tax, for example – it could put life into politics and move the markets too, one way or another. That move could be significant, especially if markets think that the chancellor is putting politics before the economy. Remember the Kwasi Kwarteng debacle and how sterling crashed universally. Best to avoid such an outcome.
Later this week there are ‘flash’ (i.e. preliminary) readings for the Purchasing Managers’ Index (PMI) at a critical time for business. Do business leaders view the next few months optimistically? How full are order books? Are they still hiring staff? It could all indicate whether a recession has been successfully avoided.
Sterling remains poised just above the five-year average against the euro, and 5% up on the US dollar compared to this time last year. Not a bad rate at all, then, to fix for the year ahead with a forward contract. You can do that with a call to your trader on 020 8108 5163.
