Garton Global | Monthly Market Digest
Sterling enters November with the Bank of England’s interest rate decision and updated forecasts firmly in focus, as markets assess how policymakers will balance persistent inflation against slowing activity. In the US, the 3 November midterm elections will bring renewed attention to government borrowing, growth and policy uncertainty, with the outcome potentially influencing dollar sentiment. Across Europe, energy prices will remain a key concern, as sustained supply pressures could weigh on growth while limiting the ECB’s scope to lower rates.
Check your positioning and speak to the Garton Global team today.
LAST MONTH: October
🇪🇺 Euro weakened as French debt concerns intensified
• The euro fell as mounting concerns over France’s public finances and resistance to budget cuts triggered a sharp sell-off in French government bonds, pushing 10-year yields close to 5%.
• Political unrest and uncertainty over the government’s ability to rein in its deficit added to pressure on the single currency.
• Sterling benefited against the euro, while demand for German Bunds highlighted growing divisions across the eurozone.
🇺🇸 US dollar lost momentum as weak jobs data challenged its rally
• The US dollar weakened after September payrolls rose by just 29,000, well below expectations of around 100,000.
• Downward revisions to July and August employment figures, alongside a rise in unemployment to 4.2%, raised concerns over labour-market strength.
• Markets pushed back expectations of further Federal Reserve tightening, interrupting the dollar’s rally and giving GBP/USD room to recover.
🛢️ Oil stoked inflation and borrowing-cost concerns
• Oil prices remained volatile as disruption to Middle Eastern energy supplies and uncertainty surrounding Russian and Ukrainian energy infrastructure heightened concerns over global supply.
• Brent crude climbed above $116 a barrel, adding to inflationary pressures and complicating the outlook for interest rates.
• Rising energy costs and government bond yields increased borrowing pressures for businesses and households, keeping markets focused on the wider economic impact.
THIS MONTH: November
🏦 Sterling faces a key test as the Bank of England sets its rate outlook
• The Bank of England’s 5 November decision and updated forecasts will be a key driver for sterling, with markets scrutinising the vote split and guidance.
• Policymakers’ assessment of persistent inflation pressures against slowing economic activity will shape expectations for the path of interest rates.
• A firmer-than-expected stance could support the pound, while a softer outlook may weigh on sterling as markets look ahead to the Fed and ECB decisions in December.
🇺🇸 US dollar faces uncertainty as midterm elections put policy in focus
• The 3 November midterm elections will determine control of Congress, influencing the administration’s ability to pass tax and spending legislation.
• Markets will assess how the result could affect government borrowing, economic growth and policy uncertainty, with implications for the dollar.
• A clear outcome or a prolonged dispute could trigger different market reactions, meaning the election result will not necessarily be positive or negative for the dollar.
🇪🇺 Euro faces pressure as energy costs threaten Europe’s growth outlook
• Energy prices will remain a key risk for the eurozone in November, with the ECB highlighting their potential to drive inflation higher while weighing on economic growth.
• If supply pressures persist, elevated costs could squeeze European businesses and households, complicating the economic outlook.
• Higher energy prices may also limit the ECB’s scope to lower interest rates, leaving the euro sensitive to developments in global energy markets.
Have a great month,
The Garton Team.