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Weekly roundup: Pound undermined by uneven economic recovery

currency-newsWeekly roundup: Pound undermined by uneven economic recovery
The pound was subdued at the start of last week’s trade, as investors once again became concerned over the UK’s energy shortage. Hopes that Russia would boost gas supplies to Europe faded after a pipeline capacity auction showed no increases, which caused UK gas prices to soar.

Sterling then managed to recover as the UK government unveiled £9.7bn of foreign investment at the country’s Global Investment Summit, with many of the deals focusing on green technology.

Expectations that the BoE would hike rates this year also underpinned Sterling, helping it recover after the UK’s CPI unexpectedly eased from 3.2% to 3.1%.

However, towards the end of the week, mixed data releases began to weigh on Sterling sentiment. Although the UK’s PMIs beat forecasts, retail sales in September fell for a record-breaking fifth successive month, while manufacturing output slowed to near stagnation.

With the UK’s economic recovery looking bumpy at best, and Covid cases on the rise, traders reduced their bets for a November rate hike and the pound lost a key pillar of support.

So far this week, the pound has regained the upside amid a risk-on market mood and a sharp fall in UK Covid cases. While four days of data is not enough to draw solid conclusions about the overall trajectory of the virus, GBP investors are nonetheless cheered by the drop in infections.

Coming up, the UK’s autumn budget on Wednesday could cause some volatility in the pound as markets react. As Rishi Sunak has already unveiled a number of spending pledges, investors will be focusing on tax plans and support for businesses as the country emerges from the pandemic.

UK coronavirus cases could also affect the pound this week, with GBP likely to climb if infections continue to fall.
Philip McHugh

Philip McHugh

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)

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