This past week was relatively light on data compared to recent, event-filled weeks. Our primary focus was on key speeches from central bankers to gauge whether the Pound’s recent gradual decline would persist, and if so, how much further it might fall.
The week’s first major update came from the UK with the release of the Public Sector Net Borrowing figures. Forecasts had predicted a significant increase in borrowing from the previous 13 billion GBP to an anticipated 17.4 billion GBP. However, the final figure came in slightly lower, at 16.6 billion GBP—still up from the last reading but not as dramatically as expected. This was a modest win for Chancellor Rachel Reeves as the new Labour government prepares for its first Autumn Budget, set for the end of the month. The news prompted a brief uptick in the Pound against the USD, although these gains were short-lived.
Later in the day, Bank of England Governor Andrew Bailey delivered the first of three speeches for the week at the Bloomberg Global Regulatory Forum. He warned of potential financial instability akin to the 2008 housing crisis if governments continue to relax financial regulations, specifically highlighting the risks posed by clearinghouses if not properly managed. While the immediate market impact was minimal, Bailey’s remarks underscored the fragile state of the global economy.
On Wednesday, the Pound continued its gradual decline against most major currencies, driven partly by a lack of significant data releases. Both European Central Bank (ECB) President Christine Lagarde and Governor Bailey spoke; while Lagarde’s comments had little market effect, Bailey’s remarks led to a noticeable uptick in the Pound against the USD, reversing the currency’s earlier weekly low.
Thursday brought the week’s most significant data releases, with PMI reports from the UK, Eurozone, and US. European figures were surprisingly positive, reflecting a slight recovery in Germany. The UK’s figures remained above 50, although they came in slightly below forecasts. US data met expectations and, therefore, had little market impact. Overall, as often happens on days with simultaneous releases from these three economic powerhouses, the market impact was limited, with figures largely offsetting each other.
Looking ahead, all eyes will be on the UK Autumn Budget, set for release on October 30th, which is expected to introduce substantial changes to the UK tax system. Additionally, next week brings several key employment reports from the US, which could drive volatility in the markets.
