It’s been a whirlwind few days again in the UK as we were introduced to our third Prime Minister this year!
On Tuesday, Rishi Sunak walked through the famous door of Number 10 and set to work appointing a new government of equal parts continuity and change. In his first speech as PM, he recognised the mistakes of the Truss administration and promised to work tirelessly to bring economic stability back to the nation.
Virtually all the markets have reacted positively to the news and in many ways we’re now back to where we were before the disastrous mini-budget. The damage though has been done and there are estimates circulating amongst financial experts that the UK is currently looking at a £35 billion fiscal shortfall that will need to be addressed.
The Chancellor has pushed back his emergency financial statement and will now be delivering a full Autumn Statement on November 17. Many are expecting the announcement of significant spending cuts and a return to austerity measures.
The currency markets have been generous to Sterling this week. We’ve seen the Pound gaining against both the Euro and USD. With the Euro/Dollar we have seen a bit of yo-yoing around the parity mark, hitting 0.99 at one point before bouncing back.
In Japan we’ve seen continued currency problems with little optimism. As mentioned before, the Yen is at its lowest rate against all major currencies for decades and despite some direct intervention by the BoJ earlier this week, we’ve seen little positive moves.
For the UK, the next big test comes next week on Thursday when the Bank of England is set to announce their latest interest rate decision. Given the volatility over the last few weeks, there is little consensus on what they will choose to do. At the time of writing speculation is rife.
It’s also worth pointing out that the US Federal Reserve will be making their interest rate announcement the day before on Wednesday next week.
Yesterday in Frankfurt, the ECB announced that the Eurozone rates would rise to 1.5% and in Canada on Wednesday, the RBC raised rates again to 3.75%.
Finally, Japan continues to go against the trend with the BoJ once again refusing to raise rates, maintaining them at -0.1% in the world’s third biggest economy.
