Economic fragility in the UK was underlined last week by disappointing data, while markets await monetary policy decisions in the US and UK
Market Recap:
Despite an underwhelming UK GDP release last Friday, where figures showed UK GDP flatlining in July, sterling has remained resilient and at time of writing is nearing monthly highs against the euro.
The pound is also trading at monthly highs against the dollar as markets are currently deemed ‘risk on’. There is a high probability of a hold from the BoE on Thursday as inflation remains relatively stubborn, with a forecasted 8-1 vote split in favour of holding rates at current levels.
In the next few weeks, money markets may also be influenced by the expectation of tax increases in Chancellor Rachel Reeves’ November budget. It’s widely believed that Reeves will have to use tax hikes to fill a large budget gap.
Elsewhere, the euro kept up its strong showing against the dollar, strengthening by 0.18% in the last month and 5.94% in the last year, but fears also remain about the fragility of the eurozone economy.
Coming Up:
As well as monetary policy decisions, markets will be focused on inflation (Wednesday) and unemployment (Tuesday) figures in the UK, with the underlying state of the economy making investors jittery. That could also be said of the EU, with the ZEW Economic Sentiment Index (Tuesday) expected to reinforce the fragile state of the German economy, the largest in the eurozone.
