The Pound is having a (better than expected) stable week so far..
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| UK inflation data for October offered no surprises this morning with the headline number coming out at 3.6% (3.8% September).
The more important core number went lower (3.4% v 3.5%) and the services number (4.5% v 4.7%) also followed lower and as we have been saying for many months now, we pretty much have a guarantee of a 25bp rate cut in December (already priced into GBP).
What isn't priced into the Pound's current value is the outcome of the UK Budget next week.
No-one really knows what is going to happen and as there are so many rumours, someone is going to be proven right and others proven wrong. What is without doubt though is what 400 of the world's best mutual and hedge fund managers think of Sterling's performance in 2026.
A well-followed 'Fund Manager Survey' from the Bank of America (BoA) shows that just 3% of voters forecast Sterling strength next year.
My guess is this result is very UK Budget and global recession focused, both of which may offer surprises yet. Still, for those of you hoping and maybe even expecting GBP to recover after the Budget or perhaps at some point next year, I advise caution on that belief.
The Budget is very likely to be dis-inflationary and therefore the BoE will have to cut interest rates faster and further to ignite economic growth and help consumers (investors move away from UK assets).
If a UK recession officially arrives, it's likely to be stagflation instead (likely the case already) which is much more difficult to get out of. If a global recession arrives next year (AI bubble), as Sterling is not a safe-haven currency, you know what happens next.
Either or all of these outcome will see the Pound fall much further compared to the current trading levels we see today.. |
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