Pound v Euro suffers biggest weekly loss since 2023..
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| The latest UK Budget was always going to be controversial and a large headwind for Sterling, as a new party takes the reigns on the country's finances.
Initially, there wasn't much movement down for GBP (0.3%) as Chancellor Reeves delivered a change of tactic. But then a sense of panic settled into financial markets as once all was said and done, remnants of the Liz Truss budget was brought into play.
The mid-market rate of £-€1.2040 was all of a sudden dropped to 1.1840 as investors sold of UK Government bonds, which in-turn immediately devalued the currency. This was always the risk surrounding the event and so well done to those who either fully or partially hedged their exchanges before the event.
The lack of foreign investment/money flowing into the country is bad news for GBP. As was the economic forecasts delivered during the budget. Despite increasing spending by £70BN, economic growth is expected to weaken in the coming years after a bounce next year. With spending and borrowing going up and growth heading down, this represents poor conditions and returns for consumers and investors alike. A poor scenario for the Pound.
It will take sometime for GBP to stabilize and it may need a damage control event by the BoE, who judging by the outlook on inflation in the years to come, may look to slow the pace of interest rate cutting (goods news for £).
The Euro-Zone published some good results this week with inflation back up to target and GDP surprisingly climbing to its fastest pace in 2-years in Q3. This has strengthened the value of the Euro both near & long term.
Next up is arguably the biggest event of the year, the US election..
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| Expected mid-market ranges for November 1st 2024 | | |
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| On this day - |
In 1755, Lisbon earthquake kills more than 50,000 in Portugal
In 1894, the vaccine for diphtheria announced by Dr Emile Roux of Paris
In 1922, the Ottoman Empire falls
In 2012, scientists detect evidence of light from the universe's first stars, predicted to have formed 500 million years ago
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