Sterling made an inspiring recovery to start the week, notching impressive gains against both the Euro and Dollar. Market sentiment was significantly upbeat on Monday, allowing the Pound to rally despite increasing Brexit concerns. The Conservative Party Conference began in Manchester yesterday and Rishi Sunak said that the government “want tax cuts” but following the pandemic “in order to do that our public finances must be put back on a sustainable footing”. Sunak argued that while tax rises are unpopular and “un-conservative”, funding the pandemic economic recovery “comes with a cost”. The Chancellor’s speech comes only three weeks before his Autumn Budget. With it being clear that Sunak is against “reckless borrowing and soaring debt”, tax hikes could be a strong possibility come 27th October.
Positive market sentiment naturally dampened the safe-haven US Dollar. Sterling was able to capitalize by gaining almost 50 pips on the Greenback in the session. GBPUSD opened at 1.3547 and closed the day at 1.3601.
GBPEUR also manage to improve on Monday. The pair started the session trading at 1.1672 and finished at 1.1705.
The Euro enjoyed a better fate against a weaker Dollar. EURUSD opened the week at 1.1606 and closed Monday at 1.1620.
On the data front, there are several important manufacturing releases scheduled. This morning there is Composite PMI and Services PMI releases from both Germany and Britain. The Final Composite number for the UK is forecasted at 54.1 with a previous of 54.8. Services for September is forecasted at 54.6 with a previous of 55. In the afternoon from the US there is Balance of Trade, September’s ISM Non-Manufacturing PMI, and a speech from Fed member Quarles. At 16:00 ECB President Christine Lagarde will be giving a speech; investors will be looking to for any comments regarding rising EU inflation.