Week in Currency - 28/10/2024

Markets prepare for two wild weeks with Autumn Statement and US elections taking focus

GBP

The Pound hit a two-month low against the Dollar on Thursday as traders prepare for the new Labour government’s first budget on 30th October. Finance minister Rachel Reeves on Thursday confirmed she will change the measure of public debt that the government targets in next week's budget to allow for billions of pounds more in borrowing for investment. The statement is the latest in a series of indications from Reeves about how she wants more flexibility to borrow to finance investment within the government's budget rules.

Labour Autumn Statement will be delivered on Thursday 30th October.

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USD

The dollar index rose on Friday after data kept interest rate expectations for the Federal Reserve in check. The Commerce Department said non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped 0.5% last month after an unrevised 0.3% gain in August and above the 0.1% rise estimated by economists polled by Reuters. Investors are now focusing on the October government payrolls report this week, which is likely to be impacted by a strike at Boeing and two hurricanes that hit the U.S. Southeast.

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EUR

ECB policymakers spoke at the IMF World Bank annual meetings last week with the interest rates being the main topic. ECB policymaker Joachim Nagel said “The European Central Bank shouldn't be "too hasty" in calling off its fight against inflation even after a low reading in September.” Nagel reiterated that looking at fresh data will be key to decided the path. ECB President said the central bank will need to be cautious when deciding on further interest rate reductions and take its cue from incoming data. Traders have ramped up bets on faster and potentially bigger rate cuts from the ECB after a host of policymakers warned about the risk of undershooting the central bank's 2% inflation target - a remarkable change in tone after a two-year campaign to rein in prices.

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Elsewhere

The Bank of Canada is likely to cut its key policy rate by 50 basis points on Wednesday, as a slew of recent data on inflation, growth and unemployment calls for faster relief for consumers and businesses, economists said.

Poland will amend its budget bill for 2024, a government website showed on Friday, after Finance Minister Andrzej Domanski said last month that September's devastating floods in southern Poland were likely to lead to changes in this year's budget. Poland’s unemployment rate hit 5% in September.

Russia's central bank hiked its key interest rate by 200 basis points on Friday to 21%, the highest level since the early years of President Vladimir Putin's rule, when Russia was recovering from the chaos that followed the collapse of the Soviet Union.

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Have a good week!

Estuary FX

This week’s key data: