AUD to GBP

The episode was not found or is unavailable. Overview: Old England. Epicentre of current market turmoil shifts across the Atlantic to UK on Friday; GBP/USD ...

China has official PMIs, for both manufacturing and services on Friday, also the Caixin manufacturing version. Ifo’s Business Climate reading is seen down to 87.0 from 88.5 (weakest since June 2020, at the height of the pandemic). Finally, in commodities, with global growth concerns to the fore as central banks crank up the policy tightening dials and with the US dollar rampant, no single commodity we track managed an ‘up’ week, though of note for Australia, iron ore and coal were only very slightly down. Gilt yields meanwhile comfortably surpassed the back up in Treasury and all other global developed market bond market yields, the 10-year yield up 69bps on the week. On the week, it is the more rate-sensitive NASDAQ that fared the worse, down 5.1%, followed globally by the S&P500, down 4.7%. Elsewhere in the FX market on Friday, broad based USD strength was the order of the day, the DXY index rising by 1.7% (3.1% on the week to a new post-June 2022 high). Chances are the forthcoming US ISM’s will show the US economy continuing to fare significantly better than Europe (or China for that matter, where we’ll get new readings on Friday). GBP/USD lost a cool 3.6% on Friday for a 4.9% weekly loss and to new post-1985 low of $1.0840. Not even the boost to UK exporter earnings from the crunch lower in Sterling could spare the FTSE 100 from a 2% loss, though this was a little less than the 2.3% fall in the Eurostoxx 50. In the Eurozone, it was again a case of French services holding the fort, its PMI rising to 53.0 from 51.2 against sub-50 (and mostly lower) readings for French and German manufacturing, German services and for both pan-Eurozone readings (EZ Composite down to 48.2 from 48.9, virtually the same as the UK, to 48.4 from 48.9). Instead, they were consumed by worries over the scale of near-term UK government financing needs, at a time when the current account deficit is running at more than 8% of GDP. Whether or not the UK government announcement of the biggest tax reduction since 1972 – including removal of the top 45% rate of income tax down to 40%, large-scale fiscal support for households and business to protect them from sky-high energy prices and various reduction in ‘red tape’ – will in time yield a significant growth dividend is not something markets are yet willing to contemplate.