GBP
Sterling recorded back-to-back weekly gains against the USD last week for the first time since July, as Chancellor Jeremy Hunt scrapped almost all of Liz Truss’ mini budget in a rushed, but successful, attempt to restore credibility with the markets.
The pound’s gains came despite Truss’ resignation as PM kickstarting the second Tory leadership contest this year, with markets able to shrug off the contest thus far amid signs market-friendly ex-Chancellor Rishi Sunak is on course for Number 10.
This week, the aforementioned leadership contest will dominate the narrative, though the latest PMI surveys and GDP figures will also be digested, ahead of the next BoE decision in just under two weeks’ time.
EUR
The euro snapped a 2-week losing run last week, benefitting from broad USD softness, though was again unable to break north of parity as concerns continue to grow about the extent of the economic slowdown facing the bloc this winter.
There remain few, if any, EUR-specific bullish factors, especially as the window for ECB rate hikes slams rapidly shut, and with fighting in Ukraine intensifying.
Looking ahead, Thursday’s ECB decision highlights this week’s economic calendar, with policymakers set to deliver another 75bps rate hike, while also beginning to discuss quantitative tightening.
USD
As mentioned, the USD softened last week, with the greenback reacting negatively to the first tentative signs that the Fed may soon pivot to a slower pace of rate hikes, after a 4th straight 75bps increase next month.
Nevertheless, with underlying inflationary pressures remaining intense, risk appetite still rather fragile, and global growth slowing rapidly, it remains difficult to bet against the buck over the medium-term.
This week’s US calendar is a little quieter, with the Fed in the pre-meeting ‘blackout’ period, leaving Friday’s personal income and spending figures as this week’s highlight.
World News
Chinese markets and the Yuan stumbled as President Xi Jinping announced a record third term in power. The yuan is now under increasing pressure with Chinese stocks in Hong Kong sliding to its worst level since the global financial crisis in 2008. There will be little respite from the economically costly Covid zero policy of lockdowns to fight the virus, nor do investors appear to hold out much hope for a rejuvenation under China’s most powerful leader since Mao Zedong.
The ECB, European Central Bank is planning another aggressive hike in interest rates this week as attention moves to how high it will eventually push. In a move that seemed inconceivable earlier this year, a second straight three-quarter-point increase is now becoming the norm after three similar moves by the Federal Reserve. This is expected to bring the deposit rate to 1.5%, with many investors believing it will not settle there.
Data Releases
| Date | Region | Data Release | Forecast | Previous |
| Monday 24th October | EU | Flash Services and Manufacturing PMIs | ||
| Monday 24th October | UK | Flash Services and Manufacturing PMIs | ||
| Monday 24th October | US | Flash Services and Manufacturing PMIs | ||
| Thursday 27th October | EU | Interest Rate Decision | 2.00% | 1.25% |
| Thursday 27th October | US | Advance GDP q/q | 2.30% | -0.60% |
| Index | Open | Close |
| FTSE100 | 6969.73 | 6969.73 |
| DAX | 12868.77 | 12730.9 |
| CAC40 | 6076.2 | 6035.39 |