Home Daily Commentaries Sterling volatile after Autumn budget

Sterling volatile after Autumn budget

Friday 18 November, 2022

Daily Currency Update

UK Chancellor Jeremy Hunt confirmed in his Autumn Statement yesterday that the country was in recession, while announcing £55 billion worth of tax rises and spending cuts. The news come with little surprises as the government attempts to plug a substantial fiscal black hole. The bleak outlook for the UK economy saw the Sterling fall yesterday afternoon against the USD and EUR, respectfully touching 1.1760 and 1.1000 at the lows. However, the Pound has recovered overnight and would have been supported this morning by November consumer confidence figures and October retail sales. GfK consumer confidence for the U.K. climbing to -44 in November, which was a rise from -47 in October and was considerably better than the expected -52. A better than expected retail sales rose 0.6% although this still represents a fall of 6.1% on the year. GBP/USD is at 1.1900 and GBP/EUR is making a play for 1.1500. MPC members Haskel and Mann are both due to speak today, but their sound bites will likely be overshadowed by ECB president Lagarde who is due to speak at the European Banking Congress, in Frankfurt. In the afternoon, we also see the latest home sales data from the US.

Key Movers

Fed President James Bullard and Federal Reserve Bank President Neel Kashkari attempted to squash recent market enthusiasm about a potential early pivot towards lower interest rates on signs of slower inflation. Bullard said the proper zone for the Fed funds rate could be between 5% to 5.25%, which is higher than the current market’s projection. This has done little to sway the USD weakness seen over this week which now sees GBP /USD back up at 1.1900 and EUR/USD just over 1.0350. Prior to the recent string of positive releases from the US in November, we both currency pars started this month at GBP/USD 1.1160 and EUR/USD 0.9750. As the UK and Europe continue to plan aggressive rate hikes, this could be a growing momentum for the currency pairs if the US slows their future hikes.

Expected Ranges

  • GBP/USD: 1.1820 - 1.1990 ▲
  • GBP/EUR: 1.1400 - 1.1530 ▲
  • GBP/AUD: 1.7660 - 1.17880 ▲
  • EUR/USD: 1.0310 - 1.0480 ▲