Strife with France lowers GBP value

To sort out the climate, world leaders – and their entourage – flew from Italy to Glasgow for COP26 (Conference of the Parties number 26). The fact that this is the 26th and they still don’t have a cohesive plan may say something but I don’t like to be judgemental.

South China Sea is  starting to boil over

The financial markets are more interested in the actions of governments’ re-trade negotiations. US Treasury Secretary Yellen has told China they need to meet their tariff lowering commitments to help combat inflation. The UK and France are at loggerheads vis a vis access to British waters by French fishermen. Add in the claims for ownership of the South China Sea by China, Indonesia, Taiwan, Malaysia, Brunei, Vietnam, and the Philippines, and November starts on a rocky footing. The South China Sea disagreement is ramping up and, whilst it has been an ongoing dispute, things are getting uglier.

China is also at the centre of a massive debt problem for property companies. 20 of the top 30 Chinese property developers have breached debt control limits. Failure of any of these companies would send ripples through the Asian markets and those would be large waves if more than one failed.

Want some more negative news? Well, German retail sales slumped by 2.5% in September and Australian home loans dropped by 2.7% last month. Stop it! It’s too early for Gin.

As for the Pound, well that is down to the lowest level we have seen against the US Dollar in a fortnight. At this morning’s start of $1.3665, this pair is teetering on the brink of a drop which could take us back to the September low of $1.3420.

The GBPEUR rate is a little better supported. This pair is still, on the high side of €1.1800 but only just. And Sterling is showing similar nervousness against other currencies. GBPAUD is back down to AUD 1.8220, having found some GBP buyers just below AUD 1.82. GBPNZD is back down to NZD 1.9020 and GBPCAD is back below CAD 1.70 again, just as it was in mid-October and early May.

We will see the UK manufacturing sector purchasing managers index this morning and the British Chancellor of the Exchequer and head of the Office for Budget Responsibility will be testifying to MPs in Parliament today. We may learn more about the Budget and its repercussions from that.

Other data on Monday will include US manufacturing sector PMIs and very late in the day, we will get a Monetary Policy Statement from the Bank of Japan. That doesn’t sound like a lot to be focussing on but it is merely a prelude to a very busy week.

BOE and US Fed ahead this week

As well as New Zealand and Canadian employment data, Australia’s interest rate announcements, and a plethora of business sentiment indices, the main events are an interest rate decision from the Bank of England and the same from the US Federal Reserve. Whilst we don’t expect much change from the BOE, there is an outside chance of significant policy announcements from the Fed. So hang on tight and only scream if you want to go faster.

Oh and get some meds in for your pets, it’s bonfire night on Friday. Remember, remember, as the saying goes.

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