U-turning

GBP

U-turning

The Pound has been suffering of late as UK politics take centre stage but managed to recover ground last week. The Bank of England announced emergency purchases of longer dated UK gilts to help support the pension sector and help contain market volatility. However, over the weekend, UK Prime Minister Liz Truss and Chancellor Kwasi Kwarteng abandoned their plans to scrap the 45p top tax rate paid by higher earners. Kwarteng said: 'We are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened. This will allow us to focus on delivering the major parts of our growth package.' It's a relatively quiet week for UK data, but manufacturing, services, and construction stats will be released. The Pound—having climbed this morning on news of the government's U-turn—will be left vulnerable to geopolitical developments and risk sentiment. 

EUR

Swiss bank in focus 

Over the weekend, Swiss bank Credit Suisse was in the spotlight as concerns were made about its financial health. Senior executives spent time reassuring the bank's clients, counterparties, and investors following a 25% drop in share prices last month. Credit Suisse has told its staff: 'Credit Suisse has a strong capital and liquidity position and balance sheet. Share price developments do not change this fact.' With the Global Financial Crisis of 2008 not too far in the rear view mirror—which was catalysed by the collapse of the Lehman Brothers bank in the US—markets will be closely watching for further developments. If the bank is struggling, it comes amid the cost of living and energy crises and may impact the way the Euro trades. This week isn't data-heavy, but the European Central Bank will release its Monetary Policy Meeting Accounts which could give investors some clues into how monetary policy decisions could play out in the rest of the year. 

USD

Labour data ahead

The Pound to US Dollar exchange rate hit all-time lows of 1.0350 last week, before the US Dollar gave up some ground. The GBP/USD currency pair began the week trading at around 1.1200. The main event for data this week will likely be the US labour market figures in the form of the Unemployment Rate and Non-Farm Payrolls. It's expected that 250K entered the workforce in September, following on from August's 315K. Additionally, investors will be keeping an eye on ISM data out in the week ahead, which will give an insight into economic activity. Talks from members of the Federal Reserve will also take place and could create some USD movement. 

AUD and NZD

Central bank hikes expected

After the Bank of England intervened in markets last week to support the Pound, the British currency managed to climb higher in the second half of the week against the Australian, New Zealand, and Canadian Dollars. Meanwhile, Economists at Bloomberg expect the Reserve Bank of Australia to hike 50 basis points in their meeting on Tuesday with smaller hikes expected from there on with Governor Philip Lowe believing the need for outsized moves is now unwarranted. The Reserve Bank of New Zealand will also be expected to hike by 0.50% this week but with the interest rate at 3.0%, the central bank is wary of denting consumer confidence and increasing borrowing costs further, smaller hikes could be expected, and a hard landing is a concern.

CAD

Oil in focus

Since the end of June, oil prices have been rather subdued, at under $100 per barrel, but markets fear another move higher could occur. Reports suggest OPEC+ is preparing to cut production by one million barrels per day in this weeks' meeting. Any oil developments could play into the way the Canadian Dollar trades this week, as oil is Canada's most lucrative commodity. Meanwhile, growth has been averaging 0.1% on a monthly basis since the start of April; the Canadian economy appears to be slowing down since re-opening early this year. A 50 basis point hike is expected for the Bank of Canada’s meeting on October 26th. This week, manufacturing, trade balance, and employment data will be released. While the Unemployment Rate is expected to stay the same at 5.4%, the labour data is also forecast to show that 20K people entered the workforce in September, an improvement from August's -39.7K contraction.  

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