GBP

Yesterday the pound fell to multi month lows against both the pound and euro, a storyline that may now be apparent for the foreseeable future.

A combination of factors has caused investors to worry about the UK economy over the next few months. Most notably, fuel shortages at forecourts has caused a spike in prices and excessive queues at petrol stations. The HGV drivers shortage has been an issue for some time but we are now only seeing the effects. A lack of workforce wanting to enter the industry, cancellation of training because of lockdowns and Brexit has meant the number of HGV drivers has dramatically reduced. Prime Minister Johnson said he is prepared to use the army to help distribute the fuel from refineries but panic buying has already set in. Petrol prices are now at a 8 year high, a statistic that is adding to UK inflationary pressure worries.

It’s not just the UK which is experiencing problems. Globally, energy prices have started to spike with oil recently hitting 2021 highs. China, for instance, is in the middle of a coal and electricity shortage. The country’s economy has been booming but the lack of coal will prove a concern. To put it into perspective coal prices have more than doubled to almost $210 per tonne, up from just $90.

Currency markets are now approaching a risk-off mood. In these times we expect the USD to benefit and GBP to weaken.

Key announcements

16:45 – Lagarde, Powell and Bailey panel discussion