It seems Sterling exchange rates have taken the elevator down recently with both GBPEUR and GBPUSD prices trading in the 1.13 area- for the Dollar, we have breached 35-year lows and for GBPEUR we are back to prices seen last year.
Currently, the landscape does not look good for Pound Sterling, with talks about parity for GBPUSD looking less farfetched every day, current price action has many analysts worried about what comes next.
This week we have a few major events which we expect to move the markets; the first being the Fed interest rate decision on Wednesday evening, where we are expecting a 75bps hike following the rise in inflation in the U,S last week. it seems no matter what central banks are doing, they are all struggling with keeping inflation under control- this will bring the Fed rate to 3.25%, with expectations for this to be at 4% in the coming months.
On Thursday, the Bank of England will have their interest rate decision, and the expectation is a rise of at least 50 bps, however, it is being speculated that we could see an even bigger rise of 75 or even 100 bps in this meeting, UK inflation has also continued rising and though there is now an energy price cap, there is nothing to stop food prices going up which seems to be doing a lot of the heavy lifting on the most recent CPI measures. I am most interested to hear the BoE’s commentary especially due to the fact that the last retail sales number was very weak, and that was during peak Summer months, current numbers are showing that it could be a very bleak winter indeed.
On Friday, the new Chancellor, Kwasi Kwarteng will be unveiling a “mini-budget” on Friday to assist with tackling the current economic landscape, currently, ideas on the table are scrapping the sugar tax, scrapping the cap on bankers bonus’s, reversing the NI tax hike, and an announcement of an income tax cut in 2024- these fiscal policies will all be welcomed and to be honest very much needed right now.