Will the pound weaken again in October?

The pound suffered some particularly volatile movements last week, with GBPEUR rising and falling 7 cents, and GBPUSD 9 cents. This relates to around 6% worth of movement on GBPEUR and 8% on GBPUSD.

Such movements just highlight how volatile currency can be, and indicates why any clients looking to buy or sell the pound should be very conscious of the current market, and some of the particular attributes and behaviour of a currency, that can influence such sharp rises and falls.

This week the Conservative Party Conference will see Liz Truss deliver the closing speech on Wednesday which could be a market mover. Whilst investors were forewarned and had some expectations of the ‘mini-budget’ that took place the Friday before last, the extent of the volatility did appear to take many by surprise.

In a sign of the less than coherent narrative coming from Downing Street, Kwasi Kwarteng has this morning announced he will be reinstating the 45 p, top rate of income tax. This is following a series of public displays of concern from MP’s and cabinet members alike.

Kwasi and Liz have shown they are willing to listen to their own party, and also the public, but does this not also display a weakness and uncertainty over the confidence they supposedly had in their economic agenda?

The pound has been weaker because of the economic uncertainty over the new government’s plans. The huge increase in public spending, via tax cuts is widely seen as an ill move considering the delicate nature of the economy at present.

Investors are concerned that the UK is taking too big a risk with the tax cuts, and a more sensible approach on fiscal policy, to help balance the books is preferable.

Only time will tell, but with the Bank of England being forced to react to the potentially inflation boosting tax cuts, there continues to be a loud conversation around not only the conflict the government now has with the Bank of England, but also whether the government has got the UK on the right path.

Can we rule out further sterling weakness? For now, we definitely cannot as the currency markets react to the unfolding of this ever changing situation.

As well as the Liz Truss speech, we could expect other comments from government or MP’s this week, any of which might influence sentiment towards the pound.

We also have a whole host of new economic data as it is the beginning of a new month. A key piece of news this week will be the latest ‘US Non-Farm Payroll’ data, and unemployment report.

The US dollar has a big influence on the pound and also the Euro, and movements on the back of this news can influence EURUSD rates, which in turn often affect GBPEUR and GBPUSD levels.

Are you planning any currency purchases in October, buying or selling the pound? Will the pound weaken in October is a very valid question, and we can share with you the latest news and sentiment to help with any decision making over your FX payments.

For more information and to discuss strategy for any transactions you are considering, please contact me Jonathan on jonathan[email protected]

Thank you for reading and we look forward to hearing from you.