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Sterling continues to fall

Wednesday 12 October, 2022

Daily Currency Update

Sterling continues to lose ground against the USD and EUR. The Chancellor of the Exchequer will bring forward the budget report to the end of the month. Although Kwasi Kwarteng’s move has been praised by the IMF in a report that is published twice-yearly, the remainder of the report painted a bleak picture for the UK economic outlook. It has been predicted that the UK will have the highest inflation of G7 countries by the end of 2023 (6.3%) and the UK’s growth policies will force the Bank of England to raise interest rates higher than previously expected in an effort to stave off inflation. GBP/USD touched 1.0926 overnight as US/Asian markets digested the news and GBP/EUR fell to 1.1278. Sterling is looking a little stronger this morning in part due to conversations between banks that the Bank of England could offer further assistance should it be warranted. UK GDP data, released this morning, surprisingly fell by -0.4% from the previous month and the rolling three month GDP figure also fell by the same amount. Today US PPI data is due in the early afternoon ahead of the FOMC meeting minutes due at 7pm. There is potential for GBP/USD volatility due to these data releases, but the currency pair will likely also take direction from the latest UK headlines around the the government and Bank of England.

Key Movers

The US dollar has gained further ground against the euro and pound as global concerns continue to cause a risk-off approach from market participants. Investors tend to buy USD in times of global turmoil as a safe-haven currency. EUR/USD touched 0.9685 overnight and GBP/USD reached lows of 1.0926. Macroeconomic data will likely keep the USD busy over the next 48 hours, with US FOMC meeting minutes being released this evening and the latest CPI m/m being released tomorrow. Prior to this however, US PPI will be released early afternoon which is expected to show a monthly uptick of 0.2%. The expected data will be scrutinised, but even more so with President Joe Biden confirming an economic downturn as we head into 2023. This is the first time this has been admitted.

Expected Ranges

  • GBP/USD: 1.0920 - 1.1150 ▼
  • GBP/EUR: 1.1270 - 1.1440 ▼
  • GBP/AUD: 1.7510 - 1.7780 ▲
  • EUR/USD: 0.9650 - 0.9760 ▼