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Sterling took a big hit as we enter the final week of the month. Since the announcement of the mini-budget and Kwasi Kwarteng’s plans to cut taxes we have seen sterling exchange rates lose value significantly, the reason behind this could be that investors do not back the plans and feel that the sheer level of Government borrowing required will cause damage in the future. This week’s highlight for the Pound comes on Friday as GDP figures are released, usually giving a good insight into the state of the economy.
Towards the back end of last week, we saw the Euro drop to lows we haven’t seen since Jan 2021. The reason for this could be off the back of Kwasi Kwarteng’s plans to cut taxes. Another factor to this could be the Speech we had from president Lagarde last Tuesday where she touched on European inflation and the state of the European economy. On Tuesday we have another speech coming out from President Lagarde in which she may elaborate on the inflation comments she made last week. We also have unemployment figures coming out on Friday which depending on what way they come out we could see further volatility.
We haven’t seen the dollar this low against the pound since 1985. This is due to the mini budget and Kwasi Kwarteng’s plans to cut taxes. The other reason that we have seen USD strength could eb from the ongoing war within Ukraine. And with the threat of nuclear war coming from Vladimir Putin it does look like we could expect further USD strength if things escalate. On Thursday we have unemployment data coming out in which whatever way the figures come out we could expect to see big swings either way.
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