GBP’s slide continued throughout yesterday, with yields on long-dated bonds hitting the highest since 1998 as markets continue to doubt how the government will plug the £51bn fiscal gap. The rise in yields is another problem for Chancellor Rachel Reeves, with debt costs rising and worsening the fiscal backdrop even further. GBP could come under further pressure should yields climb even higher.
USD drew support on safe haven buying as both global equities and bonds slumped throughout the day. Even the lower-than-expected ISM manufacturing numbers didn’t put pressure on the greenback, reflecting perhaps the market's perception that USD may well be considered a safe haven again. Worth noting that September has tended to be the best peforming month for USD, especially over the last 5 years.
EU CPI came in line with expectations in the morning, supporting the ECB’s stance on holding interest rates.
*Daily move - against G10 rates at 7:00 am, 03.09.25
** Indicative rates - interbank rates at 7:00 am, 03.09.25
Chancellor Rachel Reeves is expected to announce plans to release the UK’s annual budget on Nov. 26th, according to people familiar with the matter. The Autumn Budget is widely being considered as a defining moment for the Labour Government as they bid to fix Britain’s fragile finances whilst at the same time attempting to minimise backlash from the public and financial markets. 30-year gilt yields are higher on the day by 4bp, and GBP staying near yesterday's lows.
European stocks have opened slightly higher today following yesterday's rout. But should the sell off continue today we will likely see USD demand again as markets seek safe havens. In focus today on the data front is the release of JOLT job openings and factory orders, as well as speeches by Christine Lagarde and Governor Bailey speaking at Parliament at 2.15pm.
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