Earlier this week, we saw GBPEUR increase by 0.3% with the pair hitting the 1.18s – the highest it’s been in two months. Despite the UK’s recent struggle regarding the energy crisis which saw a decline in the supply of fuel matched with an increase in the demand of fuel through consumer panic buying, it can be argued that Sterling has powered through the recent energy market disruptions and continues to sit within the high 1.17s.
According to the latest figures, published by the Office of National Statistics, UK jobs has hit a record high since records began in 2001. The UK saw vacancies hit 1.1 million between July and September with the most vacancies falling in the retail and motor vehicle sector. The Office for National Statistics has restored faith in the UK’s economic recovery as we transition out of pandemic levels with an exponential rise in the number of employees being added to payrolls. Director of Economic Statistics, Darren Morgan, has said that we have now exceeded pre pandemic levels which could see a positive effect on maximising our potential output, productive efficiency through a stronger labour market which could have a direct effect on our economic growth. Chancellor Rishi Sunak has expressed that we should be encouraged to see that the various government strategies to increase employment within our economy has worked which has led to the unemployment rate falling for the eighth month in a row.
Moving forward, the BoE has indicated that we should expect a rise in UK interest rates to ‘curb inflation’ which could provide some strength for the pound. Governor Andrew Bailey has warned the economy of a potential ‘damaging period’ of inflation following the recent energy crisis which saw higher energy prices, supply shortages and rising wages. He has urged policy makers that they need to take urgent action as the Central Bank has indicated that it will exceed 4% this quarter which is more than double its target. Meetings to discuss how to tackle this will be held in November but officials have suggested that this is going to be the ‘First Post Pandemic Hike’ which could result in some positive movements for the pound. Please get in touch with your Personal Account Manager here with us at Lumon for further guidance on Sterling changes.
Euro continues to fall as gas stocks weigh heavily on the single Currency Holdings Limited
The Euro has been falling against its peers in recent weeks as we face the global energy crisis that has sent waves of uncertainty across Europe. The EURGBP pair still sits just below 0.85 while EURUSD currently remains within the 1.15s.
In recent news for the Euro, the European natural gas stocks have been the centre of attention with worrying figures showing a very limited supply of gas stocks, that could be used up in a couple of months, thus resulting in soaring gas prices for Europe. This inflationary pressure could therefore add to the euro’s woes if a solution is not found soon. There may be a solution to the problem with the new Russian pipeline imports, known as Nord Storm 2, that has been designed to double the amount of gas being funnelled into Europe to 110 billion cubic metres per year. There has been increasing pressure for the release of Nord Storm 2 from Russia amid growing tensions between Russia and the West, and now, with the bargaining power in the hands of the largest exporter of gas in the world heading into a difficult winter season, the Russians may finally receive their approval. Colder seasons raise heating demand by up to 20 million cubic metres, thus leaving storage levels at risk and an increased reliance on the delivery of gas.
We can expect to see more clarity tomorrow as the European Council meeting is set to take place to strategise how to best tackle this ongoing crisis before the Christmas period sets in.
U.S jobs woes show decline in labour market, putting pressure on the Dollar
As previous reports have suggested, the creation of new jobs within the US has been shockingly low compared to recent predictions indicating a weakening of the US economy as we transition out of the pandemic. Last Friday, we saw the Bureau of Labour Statistics (BLS) announce its latest data regarding the health of the US employment figures. The recent figures announced that a mere 194,000 jobs were added despite the predictive figure of 500,000 reflecting a decline in the US labour market which could forecast a potential weakening of the currency.
The harsh brake on the level of employment coincides with the recent conference held by Ray Dalio, Co-Chairman and Co-chief investment officer for Bridgewater, the worlds biggest hedge fund company, who has stated that he believes ‘the workplace will never return to pre-pandemic levels’ due to the ‘influx of flexibility and technology’ as they become ‘major driving forces’ in the new world. One could suggest that although this may increase the level of structural unemployment, unemployment caused by permanent shifts in how an economy decides to operate, it has the potential to promote high levels of efficient production and higher labour productivity which could result in some favourable movements for the USD.
Looking forward, the IMF (International Monetary Fund) is holding a meeting tomorrow to discuss stabilising international exchange rates and developmental strategies for the balances of payments which could have a direct impact on the value of a nation’s currency.
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