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Politics continues to play a major role in the pound's progress.
Monday was another tricky session for currency markets as the bond sell-off continued and the price of oil nudged up towards the highest since the start of summer. Sterling strengthened slightly against the US dollar and the euro but the mood remained skittish.
If the Labour conference was all about boosting morale, John Healey didn’t get the memo. The new chancellor used his speech to caution that present conditions wouldn’t allow for Blair-era spending and that his first priority would be to control public finances.
Despite the calls for restraint, there were still plenty of policies to sink our teeth into. According to media reports, Andy Burnham will unveil plans for a new government body to invest in the energy grid. The prime minister’s speech is also expected to feature details about the new care system, water and homes.
Talks between the United States and Iran will resume in the coming days after breaking down over the weekend. The price of oil surged again to start the week, in turn pummeling borrowing costs across much of the world.
The implications of the energy crisis stretch far beyond government finances. Diesel prices on UK forecourts reach an all-time high close to 200p per litre yesterday, according to the RAC. Donald Trump is reportedly considering a ban on US diesel exports, a move experts say could have a disastrous impact on British supplies.
Overnight, the Reserve Bank of Australia raised interest rates to 4.6%, the highest level since 2011. The Aussie dollar weakened immediately after the decision as markets digested signals of a cooling labour market.
GBP: Tough talk supports sterling
Bank of England deputy governor Dave Ramsden gave the pound a boost on Monday. Having voted to keep rates unchanged at the September meeting, Ramsden suggested policymakers would not hesitate to increase interest rates should inflationary drivers continue to build.GBP/USD: the past year
EUR: Inflation forecast to rise
Price pressures in the eurozone will be greater than expected across both 2027 and 2028, the European Central Bank’s Christine Lagarde said yesterday. Lagarde also provided a double whammy of bad news, indicating that growth would come in lower than previously expected over the same time period.GBP/EUR: the past year
USD: Data and debt driving gains
High bond yields and strong economic data have helped the US dollar post a September to remember. Since the start of the month, the dollar has gained more than three cents against the pound and the outlook looks good should the Federal Reserve continue to lean hawkish.USD/GBP: the past year
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