GBP

Sterling found some much needed relief against a basket of currencies on Thursday following reports the UK government were set to reverse some aspects of its contentious mini-budget. According to numerous news outlets, the government were considering which parts of the tax cutting package which sent financial markets into turmoil last week can be ignored.

Added to this, British Chancellor Kwasi Kwarteng had cut short his trip in the US to return to London to work on the government’s fiscal plan fuelling rumours that a U-turn was imminent. When asked if financial markets had improved on Thursday as expectations of a government U-tun grew, Kwarteng responded “let’s see”. The potential shift from the government follows the recent decision to abandon the plan to abolish the highest 45% tax rate.

With Tory MP’s revolting and a surge in support for Labour in the polls both Truss and Kwarteng are under pressure to take decisive action on their mini-budget. The news sent the British currency higher racing to one-month highs against the euro and rallying by 1.8% against the US dollar to one-week highs, before a hot US inflation print reversed some of Sterling’s gains.

USD

Data showed US consumer prices increased more than expected in September reaffirming expectations that the Federal Reserve with deliver another 75 basis points rate increase at next month’s meeting.

According to the data, the Consumer Price Index rose to 0.4% for September after a gain of 0.1% in August whilst the yearly figure fell less than expected to 8.2% against expectations of 8.1%. With inflation continuing to run well above the Federal Reserve’s 2% target fed funds futures have now priced a 100 basis points worth of hikes at 13.4%.

Key announcements

12:30 – USD – Retail Sales (MoM) (Sep) expected 0.2%

14:00 – USD – Michigan Consumer Sentiment expected 59