Inflationary pressures and fragile leadership positions abound this week. Currencies remain stable but there’s tension in the markets. Below we look at sterling’s performance ahead of crucial UK inflation data, the yen softens on expectations of looser policy under Japan’s likely new prime minister, and a French credit downgrade threatens the Euro.
Read on for more and be sure to check out key insights from our team below.
Current rates
| Currency pair | Rate |
|---|---|
| eur usd | 1.1662 |
| gbp eur | 1.1511 |
| gbp usd | 1.3434 |
Rates correct as of 10:15am on Monday 20 October but may now have changed.
The Big 3
Three stories covering the latest developments in economies, currencies and borders.
Sterling steady ahead of key inflation test
The pound is on track for a fourth weekly gain against the euro, helped by calmer risk sentiment and firmer equities. But attention now turns to Wednesday’s inflation report, expected to show CPI rising to 4.0%, a figure that stands out amongst peers. Indications of faster pricing growth could cool expectations for more BoE rate cuts this year, while softer numbers may weigh on Sterling further.
[FXStreet]
Yen weakens as Takaichi set to take Japan forward
The yen softened after pro-stimulus, rate hike averse Sanae Takaichi secured backing to become Japan’s next prime minister after becoming LDP leader earlier this month, reviving expectations of loose fiscal and monetary policy. A fragile coalition has been formed with the Japan Innovation Party, to secure the premiership for Takaichi, and align on policy, however they are still a minority, so fiscal changes are not guaranteed. The Nikkei hit record highs while JPY slipped to around 150.5 per dollar. Comments from BoJ officials hinting at rate normalisation offered only limited support.
[FXStreet]
France downgrade keeps euro under pressure
The euro steadied after an initial shock from the S&P Global Ratings cutting France’s sovereign rating to A+, citing growing fiscal risks. That’s now two of the three major credit assessors cutting their double-A rating in little more than a month. French 10-year yields rose to 3.39%, widening the spread with German bonds. The downgrade adds pressure on PM Lecornu as he pushes a new budget through a divided parliament, keeping French debt, and the euro, in focus.
Looking forward
- Monday: China GDP and other data reports.
- Tuesday: Canada reports CPI.
- Wednesday: UK and South Africa report CPI. Japan Balance of Trade.
- Thursday: The US reports existing home sales.
- Friday: The US is scheduled to report CPI, delayed by government shutdown. Japan reports CPI. Flash PMIs are due for major advanced economies. UK retail sales.
Here’s what we’re talking to our clients about
We’re always here to support. Here are some of the conversations we’re having:
- UK budget on 26 November
- Impact of UK interest rate moves on their business.
- Ukraine and Russia peace talks
The contents of this article do not constitute financial advice and are provided for general information purposes only. While the content is based on information believed to be accurate at the time of publication, no guarantee is provided