Final week of the month, events to monitor this morning.

The pound hits record low against the dollar

The pound has plummeted to a record low this morning following an announcement last week by the U.K government. The announcement revealed a plan to implement tax cuts and investment incentives to boost growth. As the Sterling briefly fell 4% (£1.0379) setting a new all-time low, critics believe the new economic measures to help the economy, will in fact disproportionately benefit the wealthy and the UK could end up taking on high levels of debt (CNBC). Especially at an unfortunate time of rising interest rates. It could be said that it is a major challenge for the BoE to fight inflation while the new Prime Minister tries to sharpen the economy. However according to FX strategist at Maybank, it is the “lack of commitment” to fiscal discipline in the UK (along with the strong dollar), which has led to the weaking of the pound drastically (CNBC).   

German Ifo Business Climate Index (Sept)

In August, the GfK’s consumer confidence index for Europe’s largest economy fell to -36.5 from a downwardly revised -30.9. Which was well below some of its worst days either during the Great Recession in 2009 or at the beginning of the pandemic in 2020 (investing.com). Fears of the significantly higher energy costs are forcing households to save money aside for the upcoming energy bills. Consequently, this puts pressure onto the consumer climate as it leaves less money available for the other kinds of consumption. In addition, data suggests that businesses are more advanced than consumers in adjusting to the new realities of a life without cheaper Russian gas and oil (investing.com). Although, the figure last month appeared better than forecasted so there is a possibility it may happen again this month.       

President of ECB (European Central Bank), Christine Lagarde speech due today.

As head of ECB which sorts and sets short-term interest rates, she has major influence over the value of the euro. Which we have seen has not been performing very well recently, with the value gradually depreciating whereas the dollar soars. One of the huge reasons for the current value of the Euro is the ongoing situation with rising inflation due to spiking energy costs, however, investors will be monitoring the speech closely for any subtle hints regarding future monetary policy and interest rate shifts. Her comments could determine a short-term bullish trend or vice-versa.