Sterling continues to fall

Daily Currency Update

Sterling continues to lose ground against the USD and EUR. The Chancellor of the Exchequer will bring forward the budget report to the end of the month. Although Kwasi Kwarteng’s move has been praised by the IMF in a report that is published twice-yearly, the remainder of the report painted a bleak picture for the UK economic outlook.

It has been predicted that the UK will have the highest inflation of G7 countries by the end of 2023 (6.3%) and the UK’s growth policies will force the Bank of England to raise interest rates higher than previously expected in an effort to stave off inflation. GBP/USD touched 1.0926 overnight as US/Asian markets digested the news and GBP/EUR fell to 1.1278. Sterling is looking a little stronger this morning in part due to conversations between banks that the Bank of England could offer further assistance should it be warranted.

UK GDP data, released this morning, surprisingly fell by -0.4% from the previous month and the rolling three month GDP figure also fell by the same amount. Today US PPI data is due in the early afternoon ahead of the FOMC meeting minutes due at 7pm. There is potential for GBP/USD volatility due to these data releases, but the currency pair will likely also take direction from the latest UK headlines around the the government and Bank of England.