A week of central bank meetings

Daily Currency Update

This week we have a whole host of central bank meetings, including the FOMC and the Bank of England. It is going to be a busy week for both monetary and fiscal policy. On the former, the UK could look for another 50bp hike from the Bank of England and Friday should see a mini-budget from the new UK chancellor, Kwasi Kwarteng. Kwarteng has already positioned himself as going for growth and the mini-budget should provide details on the £100bn+ energy support package plus another £30bn+ of tax cuts.

Sterling had ended last week at a low not seen since the 1980s and the pound dropped last Friday after disappointing retail data sales, which pushed further fears of a recession and ended with GBP dropping almost 1% against the USD.

Prime Minister Truss’ energy price freeze, is expected to cause inflation to fall faster in the next few months, but the huge fiscal stimulus which comes alongside it will likely keep inflation elevated in the medium term, unless the MPC acts to offset it with higher interest rates.