top of page
  • richard evans

Doom and gloom hits GBP

Good morning


US dollar continues to remain firm, GBPUSD traded down to 1.1625 yesterday afternoon and although it is now off those lows at 1.1650, it is not hardly what one can call a sustained recovery. Further losses expected. EURUSD looks slightly different though, holding just above parity after testing, and holding, the 0.9980 area yet again in late afternoon trading. I mentioned that level yesterday morning, it would appear to now be a rather major level for the short term.


Euro’s resilience and GBP weakness means GBPEUR continues to trade near its lows, now 1.1625, the June and July lows at 1.1465 and 1.1525 respectively are certainly something of a target. Quite why GBP is weakening against EUR is not clear to me. I expect both to be weak against USD but I am surprised EUR is holding up so well. What is going on at 0.9980? I guess the prospect of a 50bps rate rise at next weeks ECB rate meeting must be having an impact, indeed some talk is that 75bps could be seen.


In the UK it is fair to say things are looking bleak. Inflation going higher, growth lower, energy prices at such high levels, compounded by slightly cooler weather, strikes, possible trigger of Article 16, cost of living crisis, none of it is good. GBP has weakened a lot but I fear there could be more weakness to come. I’ll be looking at medium term downside GBP trades against USD and EUR.


In domestic energy, I wonder how long it is before people really cannot afford to heat their homes in the winter. I know some will already be struggling but I cannot help thinking that there will be many people who have always paid their energy bills on time and without much of a thought will now be finding things really difficult. A warm summer had hidden much of the pain, as heating bills will be pretty much non-existent. But with the summer months coming to an end, the need for heating increases, just as costs rise yet again. Worrying. One other issue that I have written to my energy supplier about, and which has also been raised by another daily column writer this morning, is why our energy standing prices have gone up. OK, we know energy prices have gone up, but surely the standing charge can’t have increased? Answers on a postcard please, I’ve had nothing so far from British Gas.


Elsewhere, China has locked down millions of people around the Beijing area as the continue with their zero-Covid policy. Quite how long they can continue with this policy remains to be seen but for now they are sticking with it. Meanwhile oil prices dropped on reports that Iran nuclear talks are back on. Brent trades down to $97.45, WTI to $91.20. Just waiting for those prices at the pumps to fall sharply. Might be waiting a long time.



- 10.00 EU HICP

- 13.00 Feds Mester speaks

- 13.15 US ADP employment

- 13.30 CAD GDP

- 14.45 US Chicago PMI

- 02.45 China caixin manufacturing PMI

- 07.00 german retail sales

1 view

Recent Posts

See All

Higher US inflation puts a June rate cut out of reach

Good morning The US inflation release yesterday really sent the markets running for cover with both the headline and the core reading coming in above expectations.  The US dollar shot higher and has h

Comments


bottom of page