Currency Note

Chancellor’s “rushed” mini-budget continues to make waves across the markets.

By Sharyh Murray-Francis October 13th, 2022

The prime minister faces growing pressure from the conservative party to re-write the chancellor’s recent mini-budget plan, following the market-turmoil it caused. At the 1992 committee, Liz truss admitted that Kwarteng’s fiscal event had been rushed, and that “the ground could have been prepared better” with markets.

With the recent turbulence sterling has faced, it is impossible to know for sure where the pound will be moving forward. See what major banks are predicting for the next quarter and beyond in our latest quarterly forecast out later this morning.

In the eurozone, inflation takes centre stage for the remainder of the week, however there will be no surprises for markets as they’re final readings. We’ve just seen Germany’s annual inflation rate this morning which rose to 10%. This latest rate is the highest on record (since the 1990’s reunification), but is in line with market expectations. France’s annual inflation data will be out tomorrow.

For the US, inflation data will also be released at lunchtime today, and we will also see EIA gasoline stocks change at 4pm UK time.

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 Business Trader on 020 7898 0500 to get started.

GBP: sterling marginally weaker than dollar and euro compared to this time last week

Sterling is in a much better position against the dollar since it’s collapse at the start of the week. Overall however, the pound is slightly weaker than both the euro and dollar compared to this time last week.

For September, the RICS UK residential market survey showed that the percentage of surveyors reporting a house price rise in their designated area was 32%. This was due to a net balance of +32 of respondents citing an increase in house prices, as rising mortgage costs and declining sales volumes weighed on the housing market. October’s reading is forecast at 41%.

GBP/USD over the past year

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EUR: euro weaker against the dollar

Compared to last Thursday, the euro is weaker against the dollar. Meanwhile, despite highs and lows against the pound over the course of the week, the euro remains largely unchanged from where it was last Thursday.

Germany’s annual consumer price inflation rose to 10% today in line with market expectations.

France’s annual inflation rate however, is expected to fall gently from 5.9% to 5.6%in Friday’s data release. If this happens, it will be the lowest reading since May, along with a slowdown in energy prices.

USD: dollar remains strong against sterling and euro

It’s been a choppy week against sterling, but the dollar is still stronger overall. It is also stronger against euro.

At lunchtime markets can expect the release of September’s inflation (and core inflation) rate. America’s annual core inflation is forecast to increase to 6.4% following an acceleration to 6.3% in August. If inflation rises as expected, this will be the highest rate the US has seen since March.

Initial jobless claims and EIA gasoline stocks change data will also be released today.

For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business trader on 020 7898 0500 or your Private Client trader on 020 7898 0541.