Market insights

Market Comment -18th October 2022

Good morning,

Yesterday saw one of the most turbulent sessions for the Pound in recent months. The new Chancellor reversed a number of tax cuts which saw the Pound make great gains versus the Dollar and the Euro. However reality quickly set back in again being inflation and the cost of living. So what's the issue. The reality, it would appear, is that the Government shouldn't have just avoided tax cuts, it also needs to make some tough decisions on cutting back on spending. The first means no extra revenue coming in and the latter means they have to cut back on what's going out...furthermore the areas that soak up the highest level of spend are: Health, pensions, welfare, education and defence...which can anyone justify choosing as we come out of a global pandemic and there's a major conflict near the borders of Europe?

The Pound, for now, has settled in to the bottom of the longer term trading range versus the Euro. However with the UK's inflation numbers out at breakfast tomorrow that could turn on a sixpence. Analysts are predicting 10% year on year price growth. Expect Pound volatility at breakfast tomorrow.

Versus the Dollar it's a similar story. The trend looks to be more in the recovery phase for the Pound, but this could always be short lived based on the last couple of weeks.

Against all major currencies the Pound has benefitted from the decisions made by the Government in the last week with the biggest gains made just before the weekend. This week has seen a consolidation of those gains.

Today sees Eurozone economic sentiment numbers and the UK's 30 year bond auction. This auction doesn't normally make the headlines, but the BoE's recent emergency intervention in the bond market will bring this piece of news into focus.


Today’s Economic Calendar

EUR: 10:00 ZEW Survey - Economic Sentiment

GER: 10:00 ZEW Survey - Economic Sentiment

UK: 10:30 30 Year Bond Auction

UK: Wednesday 07:00 Inflation Data


As ever we look forward to keeping you in the loop and look out for our next update.

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