Sterling has already seen some activity this morning, dropping as soon as trading started this morning in Asian markets, then leaping upwards as the news came through that the chancellor is reversing the 45% tax cut, then settling down again.
As the Truss-Kwarteng supporters have pointed out, sterling may have sunk disastrously post ‘fiscal event’, but then it recovered, at least partially.
Nevertheless these are highly volatile days where anything can seem to happen – not least on the other side of Europe where the Russian campaign continues to flounder.
To lock in today’s rate, do call your trader on 020 8108 5163. For those with a significant trade upcoming, it can be huge relief to know you can afford your overseas purchase. Of course, you could tune in to the Conservative Party conference and see what might be influencing sterling, or you could just call us to lock in your rate with a forward contract and go and do something more exciting instead…
While it’s a busy week for politics, it’s a relatively quiet one for data.
There are final readings for PMI for the UK and eurozone. The Purchasing Managers’ Index is a respected gauge of economic confidence and future performance. So far this morning we’ve had Germany’s manufacturing PMI coming in at 47.8. This is significantly lower than expected, and down on the 49.1 in August. The UK’s is due at 9.30am.
However it is the news that the chancellor Kwasi Kwarteng has abandoned the 45% rate tax cut – after criticism by several Tory grandees, or what passes for those these days – that has interested the markets. It was the most obviously unpopular part of ‘Trussonomics’ and as his own supporters have pointed out, barely a rounding error in the overall scheme of this massive tax-cutting plan.
However, it is an indication of the weakness of the PM among her own MPs.
Later in the week, two datasets that could be about to rise in importance. Firstly, the Halifax House Price index, currently rising at 11.5% but which could soon be affected by rising interest rates. Secondly, Labour Productivity, which is one of the targets for the government, but which has been treading water in recent quarters.
In an interesting survey from our partners at Your Overseas Home last week, 60% of their clients said that the current crisis/debacle/whatever has made them more likely to move abroad, not least for the cheaper cost of living. Among the other 40%, saying they were less likely to move abroad now, several mentioned the weakness of the pound. Worth pointing out therefore, that while GBP/EUR is weaker than those post-Covid highs of last year, it is still stronger than the average of the past five or six years. Therefore there is simply no point in waiting for it to strengthen: it already has. So do make that call to your trader on 020 8108 5163.
