UK Budget to put more pressure on GBP

Consolidation period expected this week after prolonged hypersensitive trading conditions..



GBP
Last week, GBP v USD lost 2.5% of its value and GBP v EUR lost 0.5%

The latter pair doesn't really tell a fair story from the headline as 0.5% trading volatility is standard for the pair. But 1.2% was lost in a matter of hours during that week after the BoE Governor Bailey comments, just at a time when £-€ was riding high.

For Sterling-Dollar, this was both a swift and a sustained drop-off. Things have compounded slightly into this week too with US & UK jobs affecting both countries and currencies. Across the pond, the unemployment rate fell in August and jobs added easily beat estimates. In the UK, salary inflation fell for the 3rd consecutive month with September's reading the lowest since Feb 2021. The report also shows increased redundancies and lower demand for workers..

It has been an unexpected colossal rise in Q3 for Sterling overall though (historically an overall poor quarter for £). Mid-market saw a low of £-€1.16 and a high of £-€1.20 with £-$ seeing 1.26 and 1.34 respectively over the same period. This highlights perfectly both the hypersensitive environment and just how well GBP has performed in the period. 

With the economic data available this week, we expect to see a slow start to the week until Thursday/Friday and so we should see current trading levels consolidated. Unless rumours or leaks of the UK Budget due October 30th are revealed..



EUR
It was one step forward and two steps back as far as the Euro was concerned last week. Although, those steps actually had nothing to do with the EU/€ themselves. As mentioned above, 0.5% was gained versus the Pound (all to do with UK/£), but a clear 2% was lost against the USD (all the US/$ doing).

A similar theme exists this week in that there is nothing of note out of the Bloc and with little else on offer, we may see a non-event as far as € sellers/buyers are concerned..



USD
We mentioned this time last week that we were cautious of writing off more value on the Dollar. This was simply a lucky call at the timing of the comments, as we never expected the fortunes to change for the USD so much, so quickly. 

But the trends were there to suggest a pullback was inevitable sooner rather than later. A tough Q3 mixed with our experience to know that things do change in an instant on this market were the main drivers. Since then; US jobs, money markets and Governor Bailey have led us to seeing a quick smash and grab scenario for $ sellers. Consolidation is the likely play this week..



Expected mid-market ranges for October 7th 2024

gbp
GBP
usd
USD
=
    $1.3000 - $1.3100    


gbp
GBP
eur
EUR
=
    €1.1875 - €1.1950    

Upcoming Data
Monday 7th September 2024
20:00 US - Consumer credit



Tuesday 8th October 2024
13:30 US - Trade balance


Wednesday 9th October 2024
07:00 EU - German trade balance
12:00 US - Mortgage applications
19:00 US - FOMC meeting


Thursday 10th October 2024
09:30 UK - Credit conditions survey
12:30 EU - ECB policy meeting
13:30 US - Initial/continuing jobless claims & CPI
19:00 US - Fed budget balance




Friday 11th October 2024
07:00 UK - GDP, industrial/manufacturing production & trade balance
07:00 EU - German CPI
13:30 US - PPI




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