Market Update 4th October – 8th October
Where you will be able to keep up to date with all the latest changes in the currency market
Sterling suffered heavy losses over the last week against all major currencies off the back of the petrol crisis and the rise in gas prices. This led drops of over 2% and higher. However a slight recovery was seen at the start of this week as this dip in Sterling encouraged bargain hunters which has seemed to help stead the undervalued pound.
Even though there are no major economic figures In the calendar these coming days BOE remain supportive of the pound. As well as this the release of the UK GDP data that showed the economy grew more than initially anticipated, this was also another factor that helped the sterling find some support. Boris Johnson also came out this week and urged Britain’s bosses to give the country a pay rise as he warned cheap foreign labour was finished. As well as this Boris stated that low wages were playing a key role in the crippling shortages affecting everything from fuel supplies to supermarket supplies, and also admitting that the UK’s supply problems could continue up to Christmas.
European nations are struggling with higher inflation as the ECB’s 2% target is being squeezed by France, Italy and Spain. European natural gas prices have also jumped to record highs as traders watch for any sign of extra fuel from the region’s biggest supplier Russia. Asian spot prices are also surging as Buyers from China to South Korea are having to compete with Europeans for any available cargoes. In a week light on economic data, the GBP/EUR will look to news headlines and analysts will consider the rate situation after last week’s inflation in Germany and Europe came in at 4.1% and 1.9% respectively.
The dollar goes into the new week down 1.5% against sterling in comparison to last Thursday. Although, it’s still maintaining its multi-month highs against the euro, gaining over 2% across September. After last week’s global energy crisis paired with the Evergrande credit issues, dollar saw strength across the board as investors bought into the ‘safe haven’ currency.
However, as tensions begin to dissipate, so have people’s investment fears and this has seen a dollar sell off into the new week. Furthermore, there are key economic figures coming out across the week for the dollar including ISM Services PMI data on Tuesday, followed by ADP employment change figures on Wednesday. Finally, on Friday non-farm payroll figures are out which provide a key indication of the economic position in America. Expect volatility throughout the week, especially as many economists are talking about potential stagflation as we go into the winter.