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Sterling stabilised on Monday ahead of Wednesday's crucial inflation report.
Sterling enjoyed a more optimistic Monday as last week’s Budget-induced fever began to break. The pound strengthened against the US dollar and the euro across the day, while the yields on UK government debt softened – an indication that investors were a little less concerned about the state of the nation’s economy and politics.
However, bad news was never far away. Consumer sentiment in the United Kingdom dipped to a four-month low this month. According to S&P’s report, uncertainty around the upcoming autumn Budget has dragged down household spending. Appetite for loans has increased at the same time as their availability has worsened.
Local councils in England are set to lose their ability to stop large housing projects across the country. Under government plans set to be unveiled this week, authorities will be prevented from refusing planning permission on projects of more than 150 homes. 900 similar schemes were reportedly blocked last year as the government looks to kickstart its ambitious building agenda.
The CEO of Klarna, the American buy-now-pay-later lender, yesterday gave an interview in which he expressed discomfort at the level of spending within the AI sector. Sebastian Siemiatkowski said he was “very nervous” about the size of investments in data centres, a worrying comment coming from someone at the forefront of consumer credit.
Japan’s economy contracted by 0.4% in the third quarter of the year, slightly better than market forecasts of a 0.6% drop. Elevated costs helped cut spending in most markets and the effect of tariffs continued to be felt by manufacturers. The latest figures underscore the challenges facing new prime minister Sanae Takaichi, now embroiled in a war of words with China over Taiwan.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
GBP: Mann sounds inflation warning
The Bank of England’s Catherine Mann broke ranks with most economists to warn that inflation may linger longer than predicted. Those comments helped prop up the pound to start the week, although Mann warned that the economy was increasingly exposed to market shocks.
GBP/USD: the past year
EUR: Upgraded growth forecasts
Updated growth forecasts from the European Commission expect eurozone GDP to reach 1.3% in 2025, an upgrade from the previous 0.9% estimate. At the same time, it lowered its 2026 forecast to 1.2% from 1.4%. Interestingly, it projects the Eurozone budget deficit will widen to 3.4% by 2027.
GBP/EUR: the past year
USD: Fed and jobs dominate thoughts
The US dollar is bracing for the first job market data in almost two months. Thursday’s delayed non-farm payrolls for September will be a crucial yardstick for the Fed, whose governors struck a hawkish tone on rates last week. Traders have adjusted the odds for a cut at the December meet accordingly, which are now down in the 40% range.
EUR/USD: the past year
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