A global network and market expertise

As the results of the UK general election filtered through during the early hours, markets responded with a shrug to the anticipated Labour majority victory under newly-appointed Prime Minister Keir Starmer. Despite a narrower victory margin than both the polls and models had predicted, the impact on sterling has thus far been muted, reflecting investor preparedness for the political landscape that lies ahead.

Investors have no time to rest on their laurels as we approach the Christmas break and year-end, with all of the world’s ‘Big Three’ central banks to unveil their final policy decisions of 2023 this week.

Currencies were thrust out of their recent slumber on Tuesday, as a softer-than-expected US inflation report sent the dollar sharply lower and raised the possibility of a long-awaited dovish pivot from the Federal Reserve at its meeting this evening.

Focus in financial markets continues to remain on the UK after an extraordinary few days that have culminated in the reversal of almost all of the controversial tax cuts announced during last month’s mini-budget.

The euro seemed to be about to lock in a decent performance last week, buoyed by expectations of a hawkish ECB and a labour market report in the US that signalled to the Fed that pressures there may be easing.

The Chinese yuan was one of the best performing currencies worldwide up until very recently.

Another week of risk asset sell offs had a predictable effect on currency markets.

Risk sentiment was buffeted in both directions on Tuesday, leading to a relatively volatile trading day for most currencies.

The main focal point of the week in the currency market is almost upon us, with the Federal Reserve set to announce its latest policy decision later today.

The US dollar rose against every other G10 currency last week, as investors fret that a jump in inflation could derail the global economic recovery.

After more than a year of almost exclusively focusing on the pandemic, attention among investors has returned to the more conventional topics of macroeconomics, central bank monetary policy and politics.

The pound edged modestly higher verus its peers on Wednesday as investors bet on a potentially hawkish message from the Bank of England this afternoon.