It was a sad day for the United Kingdom yesterday, as the nation prepared itself for the death of Queen Elizabeth II, which was announced after the end of the business day.
Smart Currency Business joins the world in mourning the death of Her Majesty the Queen, and we send our sympathy to The Royal Family and to King Charles III.
We also reflect on the passing of a monarch whose face has graced our money for the past 70 years, through good times and bad, right through to the joy of the Platinum Jubilee in a blazing June. We will miss her.
Sterling strengthened over the course of yesterday against the US dollar, moving away from the multi-decades lows of the past week.
There was some movement in GBP/EUR but the pound ended where it began the day.
The European Central Bank raised interest rates by 75 basis points to 1.25%, in line with expectations but still its largest interest rate rise ever in a move, it said: “that will ensure the timely return of inflation to the ECB’s 2 per cent medium-term target.”
Early yesterday, the new British Prime Minister Liz Truss unveiled a price freeze on energy bills that will cost the economy £150bn over two years and save an average household £1,000 per year.
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GBP: Pounds gains strength against dollar
Sterling moved upwards against the US dollar yesterday, strengthening by around 1% over the course of the day and overnight. It is currently at its strongest since the start of September.
The picture was more patchy against the euro, with no overall gain.
The new Chancellor Kwasi Kwarteng sacked a key Treasury civil servant Sir Tom Sholar in a move which indicates that fiscal loosening is the new economic policy, as evidenced by the £150bn for the energy bailout.
Yesterday the RICS House Price Balance was +53, a fall from last month but still rising. There are no data releases today in what is likely to be a muted business day from the UK side. However, most businesses are operating as normal following the sad death of the Queen yesterday.
GBP/USD past year
EUR: ECB raises rates at fastest on record
The European Central Bank raised interest rates by 75 basis points yesterday – the largest rise since the birth of the single currency.
The euro subsequently strengthened against most major currencies, including by over 1% against the US dollar. There was little overall movement against the pound.
Arguments between EU states are continuing over Brussel’s plans for a price cap solely on Russian gas. As many as 10 countries are saying it should be across the board to avoid retaliatory action from President Putin.
There are no significant data releases in the eurozone today, but Spanish industrial production has surged far ahead of expectations to 5.3% year on year.
USD: Dollar weakens across the board
The US dollar weakened across the board yesterday, as the Federal Reserve is no longer the only major central bank aggressively raising interest rates.
This was despite a speech yesterday from Fed chair Jerome Powell maintaining his strong stance on inflation-busting measures, saying: “I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.”
Several other members of FOMC will be speaking today, and this could have an effect on the currency markets in the absence of any higher-impact data releases today.