It has been quite the month for British politics with U-Turns and dismissals. The drama is far from over as the new chancellor, Jeremy Hunt, who replaces Kwarteng reversed the entire mini-budget and shortened the energy price-cap guarantee from 2years to 6months.
UK politics remains the driving force behind GBP volatility, and with rumours ranging from ousting the PM to an early general election, the country appears far from stable. The genie is out of the bottle.
UK fiscal responsibility has taken a hammering since Truss took office, and even with a new chancellor /revised budget, the damage has already been done. It will take years for the UK, not days, to repair the damage, and whilst the circus continues, the FED remains hawkish as ever, meaning we could see dollar sterling parity before Christmas.
Early next year, we may see the FED pause while the effects of negative rates start to set into the economy and bring inflation down. US Core CPI is now at a 40-year high of 6.6%, and most FOMC members have reiterated that interest rates will stay high until inflation falls. Markets expect a 150pt hike between now and December, with a likely 75/50 split over the next two meetings.
Despite talks of nuclear escalation in the Ukraine war, Putin recently stated that missile strikes in retaliation for the Crimean bridge attack would no longer continue, and he is open to talks. The Euro remains helpless, with interest rate unlikely to bring it back above parity with the dollar and cold winter about to set in. The war must end around the negotiating table before we see any buying action for EUR.
Mon Oct 17
New Chancellors Budget Statment
Tue Oct 18
03:00 CNY GDP
Wed Oct 19
07:00 GBP CPI
Thu Oct 20
13:30 USD Philly Fed Manufacturing Index
Fri Oct 21
07:00 GBP Retail Sales