The pound is notably weaker today following the release of the latest UK Retail Sales numbers showing a surprise fall of 1.6%, which makes the economic slowdown anticipated, and likely recession ahead seem much worse than thought for Britain.
As I write, GBPEUR levels have dropped to a 19-month low, with the day low at the time of writing 1.1399 on GBPEUR and 1.1350 on GBPUSD. The cable level is a 37-year low, the worst for sterling since 1985 against the US dollar. I am often asked if it is a good time today to buy or sell, today appears to be a very good day to buy the pound if you are selling US dollars or Euros, it can easily be argued.
Any sense of calm and peace we had seen following Liz Truss’ announcement over an energy price freeze recently has ultimately proved short-lived. As a matter of fact, with the weekend approaching and a very busy week next week, we could be in for a turbulent time once again for sterling, particularly with financial markets closed on Monday for Her Majesty’s funeral.
This means there is less time for markets to digest news, and it increases the urgency of decisions, knowing that time is short. Next week is a crucial week with the latest Bank of England and US Federal Reserve Interest Rate decisions, plus Liz Truss’ mini budget that could very easily shape sentiment ahead for the pound.
Going back to today’s data, the British consumer is a major component of economic growth for the UK, so the poor numbers today are quite worrying for the economic outlook ahead. And this information seems highly likely to feed into any narrative by the Bank of England next week.
The Federal Reserve in the US will absolutely be one to watch too, as markets often follow the lead of the Fed, the expectation is for rising inflation stateside to trigger further sharp rises in interest rates, which may only serve to increase volatility as traders and market participants have to react to the ever-changing story on both sides of the pond.
If you are considering any FX payments shortly or longer term involving the pound, EUR, US dollar, or any other currency, now might be a good time to assess your strategy following these latest developments and with so much out there globally to move the FX markets.
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