Gentium FX | Daily Report - 17th November 2022-Sterling's Big Day
GBP: The Autumn Budget will be revealed today (due to be announced around 11:30am) by Chancellor Hunt with the aim of helping the UK Budget recover over time through tax hikes and spending cuts. For the market to view the announcement as credible, substantial fiscal tightening and forecasts that the UK will enter a multi-quarter recession will be looked for. Chancellor Hunt is expected to announce around ￡24bn in tax hikes and ￡30bn in spending cuts. Any delay in implementing most of the measures until after an election in 2024 would not help the Pounds cause. Yesterday, Bank of England Governor Bailey showed a willingness to keep increasing interest rates to combat high inflation. Overall, the Pound has seen some renewed strength this morning in the run-up to today’s Budget.
EUR: EUR/USD continues to trade above parity as a result of a weaker Dollar even though reports suggest that ECB members are leaning towards a 50 basis point hike rather than a 75 basis point increase at their next policy meeting in December. ECB member Visco suggested that the case for a less aggressive approach by the central bank is getting stronger whilst fellow member De Cos believes that the governing council should account for a higher chance of a recession at over time. Eurozone final consumer price inflation figures are due at 10am which could cause some short-term volatility for the Euro.
USD: Unemployment claims and the Philly Fed manufacturing index are due this afternoon whilst several FOMC members will be speaking over the course of today – the market will pay close attention to comments about December’s anticipated interest rate hike and what level of increase will take place. Some US banks believe that the US economy will narrowly avoid a recession whilst others suggest that a mild recession is likely. Republicans are likely to secure a majority in the House of Representative’s – this is likely to make it difficult for President Biden to implement his policies for the next two years. The Dollar remains weak due to less demand for its safe-haven status with recent data suggesting that US inflation may have peaked already.