Yesterday saw the government U-turn on the scrapping of the 45p rate of income tax for higher earners after backlash from all sides, including the International Monetary Fund, on the government’s plan to raise debt to finance the largest tax cuts in decades and its inflation support plan. Chancellor Kwasi Kwarteng also announced his intention of bringing forward his fiscal plan earlier than expected after previously insisting he would wait until the 23rd November.
The announcements saw the pound plunge to its lowest point ever at 1.0384 Monday 26th September last week, forcing the Bank of England to launch a massive bond-buying scheme to support its currency. Yesterday’s U-turn propelled cable to a 2-week high of 1.1425 already this morning, showing that the move has reassured investors.
The Eurozone have published their manufacturing PMIs, which saw Spain, Italy, France and Germany contract to their lowest point this year. Despite disappointing results, EURUSD is on the rise at 0.9887 this morning, its highest point in 2 weeks.
The United States have also published their manufacturing PMIs which saw the manufacturing industry on the brink of contraction at 50.9, down from 52.8 in August. Worrying news ahead of this week’s non-farm payroll.
Cable saw the pound recover on the previous week's losses yesterday. GBPUSD opened at 1.1135 and closed at 1.1338.
GBPEUR followed a similar trend. The pair opened at 1.1371 and closed at 1.1530.
EURUSD saw the euro on the rise despite poor PMIs. The pair opened at 0.9794 and closed at 0.9834 yesterday.