Last week, sterling price action highlighted its sensitivity to both Brexit and negative interest rate news. The currency started the week on the backfoot as the Internal Market Bill was discussed in the House of Commons where it was highlighted that if passed, the UK has the ability to break international law. This came under criticism from all the living past Prime Ministers and was even attacked by US Presidential Candidate Biden. However, the rhetoric softened as PM Johnson meet with backbenchers and EC President Ursula von der Leyen stated that she felt a deal was still possible.

Meanwhile, both the FOMC and BOE met to deliver their latest interest rate policy and relay their thoughts on economic policy. In the US, the Fed’s amendments to its policy guidance talked about allowing inflation to move “moderately” above target for “some time” before it will raise interest rates with the majority touting at least 2023 before interest rates are increased. In the UK, the BoE stipulated the possibility of negative interest rates, increasing the probability they give to a move below zero in 2021 pushing Sterling lower at the time.

Concerns of UK economic growth were further compounded as the pace of expansionary data slowed and new COVID cases in the UK remained on an elevated path. Local lockdowns were implemented with concerns of more widespread consequence amidst the ongoing testing capacity debacle.

Looking to the week ahead, Brexit and COVID headlines will continue to dominate. Informal talks between the UK and the EU’s negotiators will continue in the coming week ahead of a formal round of talks in the following week. The UK government’s Internal Market Bill will remain in the detailed committee early next week, with another vote in the House of Commons ahead. In terms of economic data, the market will keep a close eye on economic activity via the PMI services and manufacturing data as well as watching COVID cases on the rise.


  • UK Rightmove House Price Index
  • Fed Chair Powell Speaks

Following last week’s FOMC meeting where interest rates were signposted to be low for a substantial period of time, the market will be keen to hear more information about their view on the economy. UK house prices have shown some recovery in recent weeks according to various reports, today Rightmove will provide a further update on house prices.


  • UK Public Sector Net Borrowing
  • BoE Gov Bailey Speaks
  • Fed Chair Powell Testifies

The UK public sector borrowing figures are expected to increase during COVID times. BoE Gov Bailey and FOMC Chair Powell are both due to speak at different events. Following last week’s BoE meeting where the central bank stated that a negative interest rate could be a policy option, the market will be keen for further direction on this matter.


  • UK/EZ/US PMI Services and Manufacturing
  • Fed Chair Powell Testifies

Economic data from the UK/EZ and US in the form of the PMI services and manufacturing is due to hit the wires which will provide the market further insight on growth momentum following the rise in COVID that we are seeing. The market will be keen to see FOMC Chair Powell comments who is due to testify on the economic impacts of COVID before the House Select Committee.


  • UK CBI Realized Sales
  • Ger IFO Data
  • US Initial Jobless Claims
  • Fed Chair Powell Testifies

The UK CBI realised sales will provide the market with a further indication of consumer spending. The German IFO will provide further timely information on the strength of the economy in September. It was more upbeat than the PMI surveys last month, showing a rise in both current conditions and expectations. A stronger-than-expected September ZEW survey, particularly the expectations reading, points to a further rise in the IFO measure this month. The market will once again focus on US jobless claims for further signs of economic health into the Presidential Elections. The market will keep an eye on Fed Chair Powell’s speech to see if there is any change from his rhetoric earlier in the week.


  • US Durable Goods

US durable goods will be closely watched for clues on economic growth and consumer sentiment. Durable goods are defined as hard products having a life expectancy of more than 3 years, such as automobiles, computers, appliances, and aeroplanes; and as result, larger priced items are a good indicator of consumer confidence. The headline is expected to expand but at a much slower pace than the previous month.

Read our Monthly FX Forecast for a longer-term view of currency movement.

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