The Weekly Round-up

As we enter the final week of November, importers across the country are likely pleased to witness the Pound maintaining its gains from the earlier part of the week, even if it has not managed to breach the next psychological level against either the EUR or USD. Nevertheless, it stands significantly distant from the lows observed towards the end of October and the early parts of November against the USD. This achievement is particularly noteworthy considering that many forecasters had anticipated a challenging conclusion to the year for the Pound.

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The current week was anticipated to be exceptionally busy with the release of substantial data. However, it would be remiss of me not to address the Autumn budget released on Wednesday in the UK first. The Conservatives were expected to announce tax cuts in their latest budget, given that government borrowing is nearly ￡20 billion less than forecasted coupled with an impending election (latest rumours suggest it could be as early as spring next year), this presented a welcome opportunity for both Sunak and Hunt to garner some much-needed popularity within their party and among the public. The budget included cuts to National Insurance, a rise in the minimum wage, cuts to business tax, and a freeze on alcohol tax, all of which dominated the headlines.

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From a currency perspective, these measures are generally viewed as inflationary, and one might expect the Pound to surge as a result. However, revisions to growth forecasts and stronger-than-anticipated consumer sentiment and unemployment claims data from the US led to a brief sell-off of the Pound on Wednesday afternoon.

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On Thursday, the US observed a bank holiday for Thanksgiving. With key PMI data released in the UK and the Eurozone, it presented the GBP and EUR with an opportunity to make further gains against the USD. However, the expected rally did not materialize, even after strong results for both the Eurozone and the UK, with UK services registering at +50 for the first time since July's reading. Later today, the delayed US PMI figures are set to be released, and any surprising results in this release will likely induce further volatility in the markets. For USD buyers, results closer to 45 are desirable. While this may seem ambitious, any movement downwards will likely benefit the Pound.

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Looking ahead to the coming week, there is potential for another week filled with volatility. Spain and Germany will release the latest CPI figures, closely watched by analysts attempting to gauge the likelihood of rate cuts by the ECB. The US will also release several key data points, including the latest consumer confidence, prelim GDP, Core PCE Price Index m/m, and ISM PMI data. Additionally, the Fed has several key speakers scheduled, with the highlight being Fed Chair Jerome Powell, set to deliver a speech next Friday.

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In the UK, the primary focal point is likely to revolve around Bank of England Governor Andrew Bailey, who is scheduled to deliver brief remarks at an event celebrating the 50th anniversary of the London Foreign Exchange Joint Standing Committee.