Summary
Brent crude settled at $116.72 a barrel on Friday as attacks in Saudi Arabia heightened energy supply concerns.
Sterling reached a 17-month high against the euro on Friday, ahead of Wednesday’s UK Budget.
Euro area annual inflation increased to 3.8% in September, ahead of Thursday’s ECB interest rate decision.
Wednesday’s Federal Reserve decision precedes Thursday’s US GDP and PCE inflation releases.
Higher energy prices and concerns over France’s public finances shaped markets last week ahead of the UK Budget and interest rate decisions in the United States and euro area. Brent crude settled at $116.72 a barrel on Friday after attacks in Saudi Arabia raised concerns about energy supplies, before easing in early Monday trading. Meanwhile, unrest and fiscal uncertainty in France increased pressure on its government bonds and the euro.
Sterling reached a 17-month high against the euro on Friday, although it weakened against the US dollar during the session. UK figures offered a mixed picture: annual CPI inflation rose to 3.5% in September from 3.1% in August, while retail sales volumes fell 0.4% during the month. Sales nevertheless increased 0.7% across the third quarter. Wednesday’s Budget will set out the government’s tax and spending plans alongside updated economic and fiscal forecasts. It arrives before the Bank of England’s next decision on 5 November, with Bank Rate currently at 3.75%.
The euro approaches Thursday’s ECB decision with inflation above target and French borrowing concerns still prominent. Moody’s left France’s Aa3 credit rating unchanged on Friday, retaining a negative outlook and assuming that a deficit-reducing budget would be adopted for 2027. Euro area annual inflation was confirmed at 3.8% in September, up from 3.2% in August, with energy making the largest contribution. The ECB’s deposit rate stands at 2.50% after September’s increase. The Bank has said decisions will depend on incoming data, without committing to a predetermined rate path.
For the US dollar, Wednesday’s Federal Reserve decision comes before another important round of growth and inflation data. The Fed’s target range is 3.75%–4.00% following September’s quarter-point increase, and Reuters reported on Friday that markets expected no change at this meeting. US consumer price inflation rose to 3.7% annually in September from 3.4% in August. Prices increased 0.6% during the month, with gasoline accounting for more than half of that rise. Thursday’s advance estimate of third-quarter GDP and September PCE inflation figures will therefore arrive after policymakers have announced their decision.
Events to Watch This Week:
Wednesday 28 October: UK Budget and Office for Budget Responsibility forecasts; Federal Reserve interest rate decision.
Thursday 29 October: ECB interest rate decision; US third-quarter GDP advance estimate and September PCE inflation.
Friday 30 October: Euro area third-quarter GDP preliminary flash estimate.
The week brings different considerations for each currency: the UK’s fiscal plans, European inflation and borrowing pressures, and the Fed’s assessment of US price growth. For businesses managing international payments, the timing of these announcements is relevant when reviewing upcoming currency requirements. Speak to the Orbis dealing team to discuss your payment schedule and the options available.
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