The pound collapsed on Friday as markets were rattled by the contents of UK Chancellor Kwasi Kwarteng’s mini-budget.
This was triggered by the announcement that Boris Johnson would face a vote of no-confidence on Monday.
The news initially pushed Sterling higher on hopes Johnson would win the vote and quell political uncertainty in the UK.
The pound quickly fell back again however, as Johnson only narrowly survived the vote leading to fresh questions over the PM’s future.
GBP exchange rates attempted to recover on the back of an upwardly revised UK services PMI and risk-on mood. Before the pound was undermined again in the middle of the week in response to a warning from Organisation for Economic Co-operation and Development (OECD) and British Chambers of Commerce (BBC) that UK economic growth may ‘grind to a halt’ over the coming year.
Sterling then rallied again in the latter half of the week amidst a market correction, before stumbling again at the end of the session amidst fresh Brexit uncertainty.
A lacklustre GDP print sees the pound open this week on the back foot, following a surprise contraction in April.
The first half of this week will also see the publication of the latest UK jobs report, where a fall in unemployment and bump in wage growth in April could help to boost GBP exchange rates.
However, the main catalyst of movement for the pound this week will undoubtedly be the Bank of England’s (BoE) latest interest rate decision.
With another rate hike from the BoE largely priced in the focus will be on the bank’s forward guidance. Will a cautious outlook from the BoE lead to a slump in the pound?
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)