Will Chancellor Reeves be able to convince financial markets (and the UK people) that she has a credible plan to 'balance the books' & promote economic growth?
| GBP
| So here we are then, the year's main event for the UK & GBP.
Firstly to say this has to be the most 'public' Budget in history and unfortunately all the noise surrounding it has led to the Pound's demise.
GBP v EUR is set to record its 6th consecutive monthly decline..
In monetary terms, the pair has effectively lost €2,000 each month since the middle of May on a £200,000 - € exchange.
£-€ is down a scary 7% since early March's 1.21 mid-market peak.
So much has happened this year to contribute to the above, but ultimately it's the UK's debt crisis and the government's handling of it so far that has caused the Pound to crash.
The question now is will things get worse?
Possibly.
Financial markets want to see tax hikes as that looks to be the only credible way out of this mess long-term. Yes this is counter-productive in many ways and there are other ideas to fix the debt problem, but this is what is probably needed for GBP to remain stable (1.13-1.14).
If Reeves breaks her self-imposed 'fiscal rules' instead of the Labour party's election manifesto (a political disaster in itself), she risks credibility and therefore will result in most believing she has lost control of the situation which will create huge nervousness of the future (bond yields will spike) and GBP will fall to 1.11-1.12.
If you have a larger exchange in the pipeline (within 2/3-months) and you have not yet moved, you still have options to either remove or lower your currency risk.
A 'Forward Contract' takes the risk off the table now.
'Hedging' removes some or most of the risk.
If you would like more information on either play, please respond to this email or contact your account manager.
EUR For the third week in a row, the Euro-Zone doesn't offer very much and this may actually be a theme for the coming months.
Inflation is under control, interest rates will remain where they are and growth is turning positive. The PMI data last week was 'good' and the Euro looks me decent value where it currently is.
USD It was once again another week of AI bubbles, recession risks and stock performances that moved the USD.
The US does offer a few bits of economic data that is worth looking out for, but they are primarily overshadowed by the UK Budget and the lack of liquidity in the market towards the end of the week due to Thanksgiving Day.
Please check out the main events of the week below..
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