Good morning,

Sterling has had a difficult 10 days with GBP losing almost 2.5% over that period. Concerns around the fuel shortage has had a knock on impact on fuel prices which has caused further concerns around the prospects of economic growth in post Covid Britain. GBP-USD was not helped by a strong USD and a general flight to safety following announcement for Federal Reserve Chair Jerome Powell saying inflation is now more concerning than earlier this year.

The Fed said they will continue buying bonds until 2022 but the monetary policy contraction may be more aggressive than previously thought, and also more aggressive than the tightening we saw following the financial crisis in 2008. Further news that US Treasury Secretary Janet Yellen has sent Congress a letter outlining that the US will likely exhaust extraordinary measures to prevent hitting the debt limit by October 18th further spurred the flight to safety and caused even further gains for the greenback.

Similarly on the continent, the impending energy crisis is weighing heavily on the single currency which is being taken advantage of by the much in demand dollar. In addition to the energy crisis, the ECB’s current and committed stance of an accommodative approach to rising inflation is adding further negative pressure on the euro.

With little to know key announcements or data releases of note; the market will be looking ahead to the OPEC meeting on Monday and the US employment data on Friday next week.

Have a good day.

Author: Joshua Nagenthiran, Senior Relationship Manager

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