Sterling continues to lose ground against Euro
The relentless rise in long term gilt yields took a breather last week, aided by the attractive levels at which UK sovereign bonds can now be bought and the soft US labour market report, which has reignited fears of a global slowdown and subsequent central bank cuts.
The chaotic reshuffling of Keir Starmer’s cabinet following the resignation of deputy PM Angela Rayner has not changed the narrative around sterling, particularly as Rachel Reeves has clung onto her role as Chancellor.
The needle now swings to the Autumn Budget announcement on 26th November. Further tax hikes appear as certain as death and taxes themselves, but investors will be crying out for this to be accompanied by spending cuts.
Sterling continues to lose ground against the currency of the UK's main trade partner, the Eurozone, on fears about stagflation and the lack of fiscal credibility from the wobbly Labour government.
This week the focus will be on a rich spate of macroeconomic data, albeit from the month of July and therefore somewhat lagged. The Bank of England will be meeting next week, but there is effectively no chance of any change in rates.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
