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Things were quiet on Monday but the pound will stay in the spotlight ahead of Wednesday.
Monday’s mood was one of anxious anticipation ahead of the crunch autumn Budget and a packed agenda of delayed US data.
The pound traded in a narrow range against the euro and the US dollar. No significant news arrived that might have shifted the dial, but that could change fast as we get deeper into the week and closer to the chancellor’s massive fiscal set piece.
The business environment worsened in Germany this month as companies showed little indication they expected a shift recovery. Conditions slipped from 88.4 to 88.1, according to the Ifo business climate survey, well below the expected 88.5. Manufacturers and retailers were particularly glum, although tourism gave the services section a much-needed boost.
Japan’s government is reportedly mulling an intervention to protect the yen and to beat back soaring yields on its debt. Worryingly, the talk in Tokyo is of Japan’s “Truss moment”, with the promise of a significant fiscal stimulus putting pressure on its currency, stock market, and bonds.
American tech stocks – for some time flagged as the canary in the AI valuations coalmine – extended Friday’s rally. Market expectations that the Federal Reserve will cut rates once again next month have been creeping up and sat at around 60% as of last night, another tailwind in the AI sails.
Geopolitics has come screeching back into frame this week thanks to frantic negotiations between Ukraine and Russia (conducted via intermediary United States, of course). Ukraine has made significant changes to a deal first proposed by Washington, although it appears unlikely Russia will accept the offer ahead of Donald Trump’s Thursday deadline.
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GBP: Keeping the beast onside
Chancellor Rachel Reeves will hope her autumn Budget keeps the bond market “beast” onside. The British public are painfully aware of how much impact this powerful cabal of investors can have. For the pound, tanking bond prices and higher yields is the nightmare scenario and one Reeves would do well to heed.
GBP/USD: the past year
EUR: Steady in the background
The euro is playing second fiddle to its rivals to the North and West this week. With things largely quiet, the euro had a stable day on Monday but lacked any real direction amid watchful conditions.
GBP/EUR: the past year
USD: Packed schedule before blackout
The US dollar must negotiate a busy period ahead of Thanksgiving and the Federal Reserves pre-meeting blackout period. PPI and retail sales arrive as a double whammy this afternoon ahead of tomorrow’s durable goods report.
EUR/USD: the past year
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