The pound has experienced a slight drop on Monday, adding to its weak performance in September where it fell by 3.7% – its worst monthly decline in a year. Currently, the pound is down 0.14% at $1.2188. While it did see a slight increase last week, reaching its lowest level since March at $1.2111, it has still managed to gain 0.8% throughout the year.
The euro, on the other hand, has remained relatively stable against the pound, with little change at 86.66 pence. Although the euro zone’s currency experienced a boost against the pound last month, it is still 2% lower since the beginning of the year.
Despite a lack of economic data on Monday, figures revealed that British house prices in September were 5.3% lower compared to the previous year, with no change on a monthly basis.
The final reading of a closely-watched UK manufacturing survey showed that activity continued to decline in September, although at a slower rate compared to the previous month.
Investors have been selling both the pound and the euro due to concerns regarding the economic outlook in Europe, following significant interest rate hikes by their respective central banks in an effort to control inflation. In contrast, the dollar has been performing well due to the strength of the US economy and rising bond yields.
Jamie Niven, senior fixed income portfolio manager at Candriam, expressed his concerns about the economic situation in the UK, stating, “I think the UK is in a very difficult place. If there’s one area where I think recession is more likely than not, it’s the UK.”
Investors are closely monitoring the ruling Conservatives’ party conference in Manchester this week. Finance Minister Jeremy Hunt is expected to speak on Monday, announcing that the British minimum wage will rise to at least £11 ($13.42) an hour from £10.42. Although this may not be a significant event in terms of market movement, Nicholas Rees, FX market analyst at broker Monex Europe, believes there is a risk that the Conservatives may feel the need to take action due to Labour’s lead in polls.
The most highly anticipated event in the markets this week is the release of US employment figures on Friday. A strong reading would support the argument that the US Federal Reserve will maintain its high interest rates for an extended period of time. This idea caused US bond yields to reach their highest level since 2007 last week.
More detail via Investing.com UK here… ( Image via Investing.com UK )