Gentium FX | Daily Report - 27th September 2022 - UK Policymakers Try to Buy Time For Sterling

GBP: As far as major currencies are concerned, high levels of volatility for prolonged periods are unusual – however Sterling is trying to defy that. Bank of England policymakers have tried to buy time instead of getting sucked into an emergency interest rate hike yesterday as the UK Treasury promised a proper budget assessment on 23 November alongside a medium-term fiscal plan and secondly, the Bank of England promising to take all market moves into account when it decides on monetary policy on 3 November. A six-eight week period is a long time as far as currency markets are concerned though leaving Sterling vulnerable particularly against a US Dollar going onto over drive. UK Markets will now be hyper-sensitive to any communication from UK policymakers. Today at midday we will wait to hear from Bank of England economist Huw Pill.

EUR: European Central Bank President Lagarde said on Monday, per Reuters that a depreciating Euro has added to inflationary pressures with interest rates expected to rise further. Once a level of neutrality on interest rates is reached then ECB policy makers will decide on next steps. Events in the Ukraine continue to hit European growth prospects. Current market conditions favour the haven status of the US Dollar.

USD: The US Dollar is firmer across the board after a wild day in the foreign exchange markets. The narrative remains the same with central bankers’ main focus on taming inflation even at the expense of a recession. The Fed projects that the US unemployment rate will rise to 4.4% by the end of next year from 3.7% today - but will still be raising rates to 4.50/4.75% in the process. Overnight the Fed's Loretta Mester reiterated that a more restrictive policy was needed for longer. The focus today will be on Fed speakers and second tier data including US consumer confidence, durable goods, and new home sales. Any upside?

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