Gentium FX | Daily Report - 17th October 2022 - Hunt Replaces Kwarteng as Chancellor

GBP: On Friday, Kwarteng’s reign as Chancellor came to an end with Prime Minister Truss replacing him with Jeremy Hunt. Chancellor Hunt will be making an emergency statement about the mini budget later this morning and will also address the House of Commons in the afternoon to bring forward the Medium-term fiscal plan that was due to be announced on 31st October which will include further U-turns. The market has so far reacted positively with Sterling strengthening across the board. However, PM Truss is under pressure as three Tory MPs have publicly called for her resignation although she has received the backing of former Tory leadership candidate Penny Mordaunt.

EUR: This week, EU members are due to reach an agreement over coordinated measures in response to the ongoing energy crisis – this could have an impact over the medium-long term for the Euro. Italy’s new government headed by PM Meloni is also due to be formed with the market likely to pay attention to her choice of finance minister. The German Bundesbank monthly report will be released today whilst Bundesbank President Nagel will speak later this evening. The Euro has lost ground against a stronger Pound but has gained against a weaker Dollar.

USD: Over the past week, the markets have been pricing in expectations that the US interest rate level could hit 5.0% in May 2023 – this is 1.0% higher than previously anticipated just one month ago. This has been driven by a hawkish tone from members of the FOMC and core inflation reaching a 40 year high. President Biden has said that he is ‘not concerned about the strength of the Dollar’ over the weekend. US retail sales came out unexpectedly flat on Friday as households cut back spending due to high inflation and rising interest rates.?

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