As Halloween mischief creeps into FX markets, the first of this Labour Government's UK budget has been announced (equally as spooky for some!). The aggressive tax-and-spend budget from the new government continues to send scary shockwaves through UK assets & wider markets even at the time of writing. Let's hope there are no nightmares in the currency market over the coming weeks.

Key Updates:

• UK Budget & BoE’s New Stance: The Bank of England (BoE) is now expected to slow the pace of rate cuts in response to the budget’s increased public investment plans, which could slow inflation easing.
• Eurozone GDP & Inflation: EUR strengthens, buoyed by GDP growth and moderate inflation, though ECB’s December hike remains uncertain.
• U.S. Stability Pre-Election: USD remains steady with strong GDP data, but election uncertainty adds to short-term risk.

GBP

GBP experienced significant movement after the UK’s autumn budget, which included new public spending initiatives aimed at shoring up infrastructure and public services. This increase in government investment is likely to decelerate the anticipated drop in inflation, leading the BoE to revise its monetary policy timeline. It is suspected that the BoE is unlikely to be swayed by the government's budget plans. However, there is a possibility that the recent increase in short-term Sterling interest rates, which have surged due to market reactions, might reverse slightly, reflecting a more cautious market sentiment. Labour's borrowing strategy appears to be navigating treacherous waters, as the new Gilt issuance is poised to approach a staggering £300bn for FY24/25 and FY25/26, something to take note of for the future.

Key data releases to watch:

• November 1: PMI
• November 2: BoE rate decisions

USD

USD finds stability as Q3 U.S. GDP hit an expected 4.9% annual growth rate, reflecting sustained economic resilience. With Fed policy signalling a ‘soft landing’ approach, the USD showed some resistance, particularly against CAD. The Focus now turns to October’s U.S. PCE price index (expected November 1), with anticipated 0.4% monthly growth following September’s 0.3% rise. If inflation shows even slight moderation, the Fed may take a steady approach into Q4, boosting USD against currencies struggling with slower growth.

Key Dates to Watch:

• November 1st: Fed Rate Decision
• November 3rd: US Non-farm Payrolls

EUR

EUR/USD strengthened as Eurozone Q3 GDP rose by 0.3%, against expectations of a mere 0.1% increase, showing resilience even as inflation moderates. Though lower than recent highs, October's inflation data suggests a tightening gap to the ECB’s 2% target. This complex backdrop has placed the ECB’s expected December 50bp hike under scrutiny, with inflation control tempered by Germany’s industrial contraction, which may necessitate cautious policy adjustments. If Germany's PMI on November 3 disappoints, further EUR gains could stall.

Key Economic Dates:

• November 4th: Eurozone Manufacturing PMI
• November 6th: ECB Economic Bulletin

Final Thoughts:

Although GBP’s steady stance may continue if the BoE delays rate cuts, EUR faces eurozone structural challenges, and USD steadies ahead of the U.S. election. Expect notable data releases in November, from PMI and PCE to payrolls, to guide FX trends as we move into year-end.

‍

A note to please continue to use support@blkfx.co.uk in your emails as well as your account manager to make sure someone in the team can pick up your query as soon as possible.

If you need any advice or have questions about how these trends might affect your specific situation, don’t hesitate to reach out!

You can always reach us via email at info@blkfx.co.uk, on WhatsApp: +44 7939 432196 or via phone: 020 8064 0617 or any of the team via their direct emails