GBP: Eyes on Truss’ reconciliation effort

UK Prime Minister Liz Truss is set to attempt a reconciliation with the different
groups of the Conservative Party after the fiscal-related market turmoil and a fall in opinion polls appear to have generated widespread discontent within the party.
Markets will keep a close eye on whether this will lead Truss to backtrack on some
of her other fiscal views (like a windfall tax on energy firms).
Barring truly encouraging news on that front, sterling still looks on a slippery slope,
as domestic and external deficit concerns as well as the risk of more turmoil in the
gilt market have made GBP more exposed to adverse risk sentiment swings.
Combining our view for a stronger dollar, we expect cable to easily slide through the
1.1000 support very soon, and to stay on a downward trend into the new year.
On the data side, tomorrow’s jobs data will be the highlight of the week. Our
economists expect the unemployment rate to notch a little higher again, but for
now, the Bank of England will keep viewing this through the lens of worker
shortages. We expect a 100bp hike in November.

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