After a turbulent week which saw the pound fall back into the 1.10 region, the pound seems to have gained some ground back as the market seems to be backing the potential appointment of Rishi Sunak after Boris Johnson pulled out in the race to become PM.
Boris initially flew back from holiday to see if he could enter the ballot, however after saying that he had received sufficient support to proceed a vote, he realised that he could not govern effectively unless he had a 'United' party in parliament.
The news saw the pound strengthen and GBPUSD pushed briefly over 1.14 but currently resides at 1.1306. The slight drop back came this morning, after UK economic activity contracted at its fastest pace in almost 2 years. The 47.1 number was the third consecutive reading under 50, meaning that a majority of businesses showed contraction in October.
Some economists believe that with Sunak in charge the market chaos that saw the pound fall to 1.0327 in September should be over, but for the pound to strengthen significantly the new PM whoever it may be will need to present some strong strategy to boost the economy.
China unexpectedly released delayed economic data Monday, a day after the conclusion of a key Communist Party congress, showing weak growth and prompting markets to plunge. This comes after they postponed last week's release of GDP amongst other data without explanation. GDP grew 3.9% between July and September of this year, slightly higher than analyst expectations but still below the government’s target annual goal of “around 5.5% The release of this key economic data just after the congress adds to concerns that under Xi, politics will increasingly trump economic priorities.
Brian Deese, director of the White House's National Economic Council, stated that the US economy had the strength and resilience to prevent the US falling into recession. The prediction is that the economy will take on slower growth rather than a deep contraction.