Sterling rises, yet big economic questions still loom large.

Once again it’s been a bumpy week for the UK economy. Whilst an imminent economic crisis has been averted following a raft of government u-turns on economic policy, UK PLC still faces a perilous road ahead.

The week was dominated by news coming out of the Conservative Party Conference which took place between Sunday and Wednesday in Birmingham. Rather than lauding new announcements, this conference saw the Chancellor forced into making a set of u-turns on key economic policy. These have had a positive effect on the markets.

It has therefore been a significantly less turbulent week in the currency markets, after the whirlwind that was last week.

Sterling started the week positively, making gains across all G10 currencies, with the GBP/EUR rate trading above 1.15 for a brief period before slowly losing its recent gains in the second half of the week.

With parliament due to return on 11th October we could see further movements for GBP crosses depending on the reaction. The government is facing serious challenges from the back-benches and could be forced into even more u-turns or potentially parliamentary defeats on upcoming economic legislation.

The new fiscal plan is due to be announced on 23rd November and by then there will be a clearer view of how much appetite and willingness there is in both the markets and parliament for the government’s radical new approach.

Hopefully, after the publication of the Office for Budget Responsibility’s independent reports on the economy and the government’s economic policy, we could see some calming of the markets.

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