24th October - Weekly FX Update

Top Currency Pairs Monday 24th October 04:00 UTC GBP/USD: 1.13110 (Last Week: 1.12327) EUR/USD: 0.98374 (Last Week: 0.97333) GBP/EUR: 1.14961 (Last Week: 1.15332)

Market News

Pound Sterling Last week, Liz Truss resigned from her post, marking the shortest reign in history for a British Prime Minister. The Pound initially remained relatively stable, meaning the market had likely priced in the decision already. Following a brief dip on Friday, the Pound has gone on to rally in recent trade, with there now being just two contenders in the race for PM, as the outcome is set to become public no later than Friday. The expectations for the strength of this rally however are toned down given the strength of the USD and the looming ECB meeting on Thursday. Today will see October's S&P Global PMI surveys which will give a good indication of the UK's economy. This week will be volatile as Wednesday's GDP may show the UK entering a technical recession, as the US could be about to exit one in a divergence of economies.

Euro The Euro gave up ground against the Pound over the weekend following on from Liz Truss's resignation as Prime Minister. The highlight of the week ahead is the European Central Bank meeting, where it is expected we will see a second consecutive 75 bp interest rate hike. Should this be the case, we may see the GBP/EUR falter, and on the flip side, if the ECB leads the market to shy away from its currency, we could see the Pound extend its gains in the short term. Markets have almost fully priced in a 75 bp hike for both November and December so it should not dramatically move the Euro should this be the case.

U.S. Dollar The Dollar will look to reverse losses in recent trading after a pre-weekend setback with forthcoming U.S. economic data this week. Several key reports will be watched closely, with the most important being Q3 real GDP, data on wages and PCE inflation. Core PCE inflation is the Fed's preferred inflation measure, and it may have climbed higher in September with a projected monthly gain of 0.5%. This would likely be more than enough to ensure the Federal Reserve remains on course to continue lifting interest rates which has helped the Dollar massively over the past months. The Dollar is expected to track higher this week off the back of this data should it be in line with predictions.

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