020 7898 0500Sterling traded higher against both the US dollar and euro throughout the day. This move against the US dollar was more to do with the rhetoric and fallout of the US Federal Open Market Committee (FOMC) meeting on Wednesday night. However, UK manufacturing grew strongly in September and orders flowed in at an above-average rate, which helped to boost sterling strength too. This was largely due to the weaker sterling driving sales.
Despite this upward movement, sterling has been on the back foot for the majority of the week. Ever since the Bank of England (BoE) signalled that a further rate cut is on the cards we have seen sterling under pressure as the realism surrounding Brexit rears its ugly head. Comments from Czech State Secretary for EU Affairs Tomas Prouza stating that the UK has ‘zero chance’ of clinching an exit deal with both immigration curbs and free-market access compounded the concerns for sterling’s road ahead.
In addition, the Organization for Economic Cooperation and Development (OCED) published its latest global projections this week, which included a massive downgrade to UK growth in 2017. It has halved its growth forecast to 1%, half the projected rate in June (based on the Remain campaign triumphing). While it is no surprise that the downgrade has happened, it is a stark reminder of the challenges that the UK economy may have to go through next year. Should we see the data releases continue to report deteriorating vitals, we could see fears of another recession. Last night also saw BoE Governor Mark Carney addresses an audience in Berlin.
