UK government to deliver ‘mini’ Budget this Friday

GBP

Last week saw UK Retail Sales decline over 1.6% adding further pressure to the economy with the outlook of a ‘gloomy’ winter ahead. Focus will be on the government’s mini budget speech this Friday as consumers hold on to the chance of a manageable energy price cap to halt further price increases.

The pound continues to remain under pressure against the euro and US dollar with the GBP/EUR pair remaining under 1.1430 and GBP/USD falling to fresh lows of 1.1390.

Markets are pricing in a 75 basis points interest rates hike from the Bank of England, which will be the most aggressive increase since 1989. With the European Central Bank and US Federal Reserve continuing to release hawkish statements and acting aggressively with monetary policy decisions, the BoE could potentially see a large sell off should the bank misses market expectations this Thursday.

USD

Today’s main event is the Fed’s interest rates decision and the market is expecting an hawkish move with a further 75 basis points rates hike. Should the Fed meet market expectations we should see further dollar strength for the medium to long term.