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  • richard evans

GBP up as Truss becomes PM

Good morning


A rare sight this morning as we turn on the screens to find GBP a bit higher! GBPUSD has been to 1.1600, not exactly heady heights but it feels a lot better than 1.1450. EURUSD has traded higher too after slipping to 0.9880, now stopped 30 pips short of parity which takes GBPEUR up to 1.1620 as I type. USD has weakened a little across the board, gold traded up to $1725 or so overnight.


AUD has weakened after the RBA rate announcement where they increased rates 50bps to 2.35% as widely expected. AUD, unable to take advantage of the weaker USD is trading down at 0.6780, GBPAUD has clawed its way back up to 1.7100. Aussie GDP numbers will be released early tomorrow morning, with RBA confirming they still see more rate rises coming but the size of them depends on incoming data, this will be an important release.


Truss has begun her new role as PM, announcing a plan to keep household energy bills capped with the government financing the difference, a cost likely to be £130bn or so. It would appear this will have to be funded by the taxpayer so whether we end up better off remains to be seen. Truss has been warned by EUs von der Leyen to respect the NI protocol if she wants a decent relationship with EU, and has been told by BCC she must take steps to save the economy and jobs. Ah, the first day of work! She must be pleased to see GBP higher on her first day of work. BoEs Mann may have helped support GBP when she said action now will avoid a deeper and longer lasting contraction.


This GBP upside may be short-lived. CITI have put out a bearish GBP call, seeing GBPUSD down to 1.10, maybe even 1.05. The cite Article 16, weak growth and higher inflation as the key reasons. It is not the first bearish GBP report I’ve seen, back in late August Goldmans said they could see GBPUSD below 1.0800 this year. While many will be enjoying this small respite, I’ll be looking for downside GBPUSD ideas just in case but keeping risks limited to the upside, just in case BoE really do start front-loading rates and surprise with a 75bps rise next week. For now, another 50bps rise is priced in.


It was US labour day yesterday, marking the end of summer for them. Seems pretty accurate to me, the weather has certainly taken on a more wintery feel with some heavy rain and thunderstorms. The grass is already looking greener and I’m sure its grown overnight. Kids go back to school today, we did check clothes and uniform fit but didn’t think to check raincoats. What sort of parents are we?



- 14.45 US S&P services PMI

- 15.00 US services ISM

- 02.30 AUS GDP

- 03.00 China trade balance

- 04.00 RBAs Ellis speaks


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