Sterling at 1.3310, falls for fourth session as markets await Healey budget and Fed
Key Facts
Sterling fell against the dollar for a fourth consecutive session, trading at 1.3310 on Tuesday afternoon, 27 October, down 0.25% from Monday’s close at 1.3342, according to Investing.com. The move came ahead of the first budget presented by John Healey as Chancellor of the Exchequer, scheduled for Wednesday, 28 October, alongside the conclusion of the Federal Open Market Committee meeting. The Federal Reserve is meeting on 27 and 28 October, and its calendar lists a press conference on the final day. The pair was down 0.44% over five sessions through Tuesday, after reaching 1.3400 on 22 October, its highest level in five weeks at the time. By contrast, sterling was close to its strongest level against the euro in 16 months, putting the currency’s weakness in the context of its performance specifically against the dollar.
The UK Treasury confirmed the budget date in a statement, saying: "I confirm today that my first Budget as Chancellor of the Exchequer will be on Wednesday 28 October." Healey said the budget would be based on fiscal discipline and would adhere to the government’s fiscal rules. The budget comes as the Associated Press said the UK economy had proved more resilient than expected over the year and had grown strongly. But the agency also noted that higher inflation linked to the Iran war and bottlenecks in the Strait of Hormuz had squeezed global oil and gas supplies, making the economic backdrop for the budget more difficult. It added that limited available funds constrain Healey’s ability to deliver the Labour government’s ambitions to restore public services.
Price data cited by the Associated Press show that annual UK consumer price inflation rose to 3.5% in September, from 3.1% in August, above most economists’ forecasts of 3.4%. This was the highest level since October of the previous year, according to the agency. Motor fuel prices also rose 30% year on year in September, compared with a 23% increase in August. The Associated Press linked fuel pressures to the Iran war and bottlenecks in the Strait of Hormuz. Economists cited by the agency said they expected the Bank of England to raise interest rates at its next meeting on 5 November, after holding them at 3.75% at the previous meeting.
On the US side, the Associated Press said the Federal Reserve was likely to leave its main interest rate unchanged at the end of its meeting on Wednesday. The agency said investors saw very little chance of a rate increase at that meeting, without specifying a market probability. The latest actual reading listed in the EL7 data provided was 4% on 16 September, compared with 3.75% on 29 July. The Associated Press noted that US inflation had come in above most economists’ expectations for two consecutive months. This raised concerns that higher fuel prices could feed into other costs across the economy. The Fed decision is among the near-term events markets are monitoring alongside the UK budget.
Attention after the budget and US meeting turns to economic releases scheduled for 29 October. The Bank of England will publish its September money and credit data that day; its previous report, for August, was published on 29 September. In the United States, the Bureau of Economic Analysis scheduled the advance estimate of third-quarter GDP for 8:30 a.m. Eastern Time on 29 October. At the same time, the bureau will publish its September personal income and outlays report. The report includes the Personal Consumption Expenditures price index, which the bureau describes as reflecting changes in prices for goods and services purchased by consumers in the United States.