Both Chancellor Reeves and global stock markets rock GBP..
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| An unscheduled speech by Rachel Reeves this morning has fundamentally devalued the Pound, but it's the stock market that has fueled Sterling's drop today.
GBP is bleeding red versus the majors today, as investors get nervous over tech stock valuations. Last week saw strong earnings in technology companies and stocks have continued to climb, but many commentators are screaming 'bubble' at the next earnings season.
Today looks to be very much a blip in the road for stocks and we should see a bounce-back in the next few days, which will help Sterling reclaim the lost ground. But, if a tech bubble arrives next year, this will pile on the misery for Sterling and we will witness severely low exchange rates.
Sterling is simply in a lose-lose situation today. When stocks fall, money flocks to safe-haven currencies (primarily USD) and away from beta-currencies like GBP.
The upcoming UK Budget is the constant 'lose' situation facing the Pound. Usually, Sterling performs well when stocks are up (investors happy to take on more risk), however that hasn't been the case for the last 6-months because of the UK's fiscal concerns.
Most commentators have assumed Chancellor Reeves is the reason for GBP's fall today after her unscheduled speech didn't rule out tax rises. However, the market is already prepared for tax rises (if they don't arrive £ will improve) and so what she said was more of a softening up for us.
If taxes are risen, it will be for the first time since April 1975 (Labour). It will also probably be political suicide for both Revees & Starmer.
"Labour will not increase taxes on working people, which is why we will not increase National Insurance , the basic, higher or additional rates of income tax or VAT" Labour's election manifesto last year.
A serious nail in the coffin for Sterling would be for the BoE to cut interest rates Thursday.. |
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